Nepal | January 26, 2020

Inflation at record-low of 2.8pc as supply situation improves

Himalayan News Service

Kathmandu, July 18

Consumer price inflation dipped to a record-low level of 2.8 per cent in the 11th month (mid-May to mid-June) of last fiscal due to improved supply situation and low inflation in neighbouring India.

Inflation in India during mid-May to mid-June stood at 1.5 per cent. Lower inflation in India directly impacts Nepal as two-thirds of the country’s total trade takes place with the southern neighbour.

Steep fall in inflation had been witnessed since the beginning of fiscal 2016-17 due to high base price of the previous fiscal, when inflation had skyrocketed along with disruptions in supply lines. Consequently, consumer price inflation had moderated every passing month in the last fiscal and stood at record-low 2.8 per cent on a month-to-month basis between mid-May to mid-June, according to the Current Macro Economic and Financial Situation of 11 months unveiled by Nepal Rastra Bank today.

Balance of payments situation has improved with surplus of Rs 74.26 billion

Food price inflation turned negative one per cent in the 11th month of last fiscal from 11.9 per cent in the corresponding period of fiscal 2015-16. Likewise, non-food inflation also moderated to 5.8 per cent in the review period from 10.5 per cent in the corresponding period of fiscal 2015-16.

“The decline in growth rate of prices of clothes and footwear, housing and utilities, communication and health, among others, caused the moderation in non-food inflation in review period,” as per NRB report.

Salary and wage rate also increased in the review period by 15 per cent as compared to paltry five per cent of the corresponding period of fiscal 2015-16.

Despite substantial growth in import, the country’s balance of payments (BoP) situation improved with a surplus of Rs 74.26 billion along with the disbursement of foreign loans, grants and increased foreign direct investment (FDI) inflows in the review period, according to the central bank.

FDI inflow in the first 11 months of the last fiscal stood at Rs 12.27 billion as compared to Rs 4.80 billion in the corresponding period of fiscal 2015-16.

However, the country witnessed current account deficit of Rs 1.72 billion in the first 11 months of last fiscal due to sharp increase in imports.

The country’s trade deficit in review period soared to Rs 827.95 billion as country imported goods worth Rs 896.57 billion against exports of Rs 68.62 billion.

A version of this article appears in print on July 19, 2017 of The Himalayan Times.

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