Prices of basic food items traded at international commodity markets are increasing sharply. Nepal is also high on the list of countries with rising food and commodity prices. According to a recent joint WFP and NDRI research, approximately 2.5 million people in rural Nepal are in immediate need of food assistance.

An additional 3.9 million in rural Nepal are at risk of becoming food insecure due to increasing food prices. Based on food price vulnerability index, a total of 19.2 million rural people stand to lose from rising food prices while 3.8 million stand to gain. Nepal thus faces a serious risk of stagflation, a condition of low economic growth, high unemployment and rising prices.

Nepal relies heavily on food and oil imports. Productivity is tumbling while the population is rising. According to recent statistics, the vast majority of farmers work on less than 0.5 hectares. Out of 14.7 million hectares, Nepal has nearly 2.3 million hectares of arable land. About one-fourths of its cropland is irrigated.

Market participation of households in mountain and hilly regions is limited due to their relative isolation from functioning markets and their limited purchasing power. Given the low level of demand due to poor purchasing power and high opportunity cost of moving goods to hilly and mountainous areas, the volume of private trade is minimal in some locations like Mustang, Bajura and Mugu.

Several micro-level initiatives have aimed to increase food security in targeted areas since the mid-1970s (Food-for-Work) but the food security situation is unsatisfactory. There is no effective government strategy. Although Nepal Food Corporation (NFC) subsidises food supply to remote areas, sustainability of the subsidies is questionable. There is an urgent need to activate NFC operational capacity to stock and distribute rice at subsidised prices by prioritising poor segments of population and remote areas.

Economists generally agree on how developing countries ought to proceed: by providing income support to the poorest people in purchasing food via cash or vouchers. Farmers can benefit from increased food prices. Hence, the government needs to increase its investment in agriculture. More specifically, developing countries like Nepal need to strengthen its rural infrastructure and rural-urban linkages, and improve market access for small farmers. Shops for farm and food items, collection centres, agricultural roads, storage facilities, marketing facility of farm items, and price systems should be accessible throughout the country.

There is an urgent need to mull both short and long term policy options for food availability, access and distribution to all segments of population and regions. In the short term, targeted safety-net programmes should be introduced to provide support to the poorest population hit hardest by price increases. Moreover, there should be strict market monitoring. In the long run, the government ought to make agriculture a “real” policy priority.