KATHMANDU, Jan 18: The protracted protests and strikes in the Tarai and the Indian blockade have hit the public hard as the prices have soared markedly, not to mention the rampant black market where especially fuel is being traded several times the market price.
The Indian blockade and Tarai unrest drove up inflation to 11.6 percent in mid-December, according to Five Months' Data of the Fiscal Year 2015/16 unveiled by Nepal Rastra Bank (NRB) on Monday.
The double-digit inflation, measured as consumer price index (CPI), in mid-November, the fifth month of the fiscal year, climbed further, the bank said, adding that the climb of the inflation rate backs the central bank's earlier warning that the price rise could go out of control due to "non-economic reasons."
Earlier last month, the NRB had warned that soaring inflation and possible contraction in the economic output could push the country toward stagflation -- an inflationary period accompanied by rising unemployment and lack of growth in consumer demand and business activity.
The central bank has pointed out the turmoil in the Tarai and 'disruption on trade routes in the southern parts of the country' as the underlying factors pushing the prices upward in recent months. The central bank has, however, expressed optimism about the recent relaxation of the unofficial economic blockade.
"The recent relaxation of obstruction along most of the trade routes is likely to break the spiral like rise in prices witnessed since mid-September 2015," the report of the NRB added.
According to figures provided by the bank, Kathmandu Valley saw relatively higher inflation at 13.2 percent followed by the hilly region that recorded 12.4 percent, mountain region 10.3 percent and the Terai region 10.2 percent during the review period.
Inflation, which was at moderate levels in the last fiscal year, has started rising at an alarming rate since mid-September. Economists say that the supply side constraints resulting from the Tarai strikes and Indian blockade have pushed up the prices of most of the commodities and services in recent months.
Unlike in the previous month's macroeconomic financial and financial situation report in which the central bank pointed out 'unofficial economic blockade' as one of the underlying factors for the rapid rise of inflation, the bank's recent report has changed the terminology to 'disruption on trade routes in the southern parts of the country'.
REMITTANCE RISES 19 PERCENT
The country has received a total of Rs 271.4 billion in remittances over the period of first five months of the current fiscal year. The NRB said remittances rose by 19.4 percent in the fifth month, compared to a meager growth of 2.7 percent in the corresponding period of the last fiscal year 2014/15. The rapid growth in remittances has been attributed to the appreciation of US dollar, festive season [Dashain and Tihar] and recent earthquakes that tempted workers to send home more money. The overall balance of payment recorded a significant surplus of Rs 128.11 billion in the review period due to the remittance growth and contraction in trade deficit due to trade disruption. BOP surplus was Rs 23.35 billion in the corresponding period of the last fiscal year 2014/15.
Related story
Effect of inflation in Kathmandu Valley: Prices of food and bev...
