Inflation on high trajectory

Inflation on high trajectory
eKantipur.com, 10-April-2007

Inflation continued to stay on a high trajectory, driven up by stiff price rises of food items during the seven months of the current fiscal year. It touched eight percent in mid-February, compared to 5.8 percent of a year ago, shows a report of Nepal Rastra Bank (NRB).

The central bank stated that supplies of spices and pulses fell far short of the demand in the international market, thereby affecting their domestic prices.

“Furthermore, the recent terai protest that affected the supply of daily consumables like vegetables and fruits also pushed up prices,” the report stated.

However, the money supply -- a factor that normally determines the level of inflation -- seemed not to have played any role in propelling up prices.

The broad money (M2) supply registered a moderate growth of 9.5 percent, while narrow money (M1) increased by just 7.1 percent.

Despite the materialization of peace, government expenditure remained very low, indicating that development activities are going on a slower pace.

The report demonstrates that the government expenditure increased by 13 percent to Rs 51.6 billion in the first seven months this current fiscal year, while it grew by 19.6 percent in the same period last year.

On the revenue front, the actual revenue collection exceeded its target, growing by 17.9 percent to touch Rs 42.25 billion.

On the trade scenario, things remained bleak with export declining and import decelerating. The total exports fell by 3.9 percent during the period compared to an increase of 12.2 percent in the corresponding period last year, due partly to load shedding and terai unrest.

Of total exports, the country registered a faljavascript:void(0)
Publishl of 5.4 percent in the export to India as against a sharp increase of 22.8 percent in the same period last year. Likewise, export to third countries decreased by 0.4 percent.

Imports grew marginally by 0.3 percent in comparison to the rise of 25.1 percent in the same period last year, as industries demanded fewer raw materials due to the declining exports.

On the foreign exchange front, the reserves rose by only 3.4 percent to reach Rs 170.7 billion in mid-February.

Stung by decelerating remittance growth and decreasing export, the balance of payment remained at a surplus of just Rs 6.3 billion, down from the surplus of Rs 13 billion during the same period last year.