Inflation hit a three-year high of 11.9 percent in the first month of the current fiscal year, with the prices of both food and non-food items soaring. The figure was a little higher at 12 percent in June 2009.
Although the inflation rate remained in single digit for the first 11 months of the last fiscal year, it jumped to double digits in the last month, reaching 11.5 percent. The figure has been continuously ascending since April, 2011.
A senior NRB official predicted that inflation would remain higher until December when new harvest begins.
Inflation in both food and non food items stood in double digits—12.2 percent and 11.6 percent respectively—in the first month, according to a Nepal Rastra Bank (NRB) report on the country’s macro economy released on Sunday.
NRB Spokesperson Bhaskar Mani Gnawali said increased petroleum prices and transport fares and the strengthening of the US dollar fuelled the price rise.
According to the central bank report, vegetable prices witnessed the highest rise of 30.4 percent in first month of this fiscal year, pushing up the overall food prices. Within the non-food group, prices of footwear items posted the highest rise of 15.1 percent.
Economist Bishwambhar Pyakuryal said the rise in Indian inflation, of late, is playing a crucial role in fuelling price rise in Nepal. “Although internal factors were more responsible for the price rise in the past, the rise in Indian inflation, which is close to double digits, is now equally responsible for the price rise here,” he said.
Nepal’s trade with India accounts for two-thirds of the country’s total trade.
In a bid to curb price hike, the government recently fixed maximum retail prices of 15 commodities, including rice and oil, among others. However, given the absence a proper monitoring mechanism, Pyakuryal says the provision would encourage hoarding.
According the central bank report, exports to India increased by 5.7 percent compared to a rise of 17.1 percent during the same period last year. The decline in the exports of threads, MS pipes and zinc sheets, among others, contributed to slow export growth. Imports from India, however, surged by 48.1 percent due to the increased import of petroleum products.
Exports to countries other than India increased by 42.1 percent, contributed by the rise in the export of pulse, tanned skin and readymade leather goods, among others. Imports from third countries (other than India) increased by 37.2 percent.
The overall balance of payments (BoP) recorded a surplus of Rs 3.85 billion in the first month of this fiscal year—down from Rs 8.1 billion during the same period last year.
Remittance surged by 43.8 percent to Rs 37.61 billion. Foreign exchange reserves reached the highest level of Rs 447.86 billion.
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