Consumer inflation eases

Consumer inflation eases
eKantipur.com, 3-Jul-07

As an impact of lower rate of price rise in food materials and appreciation of the Nepali currency, consumer prices grew at 4.6 percent in mid-May.

However, average inflation for the first 10 months of the fiscal year remained at 6.8 percent, says a latest report of Nepal Rastra Bank (NRB).

According to the report on the country's macroeconomic situation for the first ten months, prices of food and beverages rose by 6.1 percent during the period, contrary to a rise of 9.1 percent a year ago.

During the period, the price of spices grew by 20 percent. However, the prices of sugar and related products declined by 16.3 percent, pulses went down by 11.2 percent, grains and cereal products declined by 6.4 percent, vegetables and fruits dropped by 6.4 percent and beverages lowered by 2.3 percent, easing inflation.

Likewise, prices of non-food items and services rose by 3 percent compared to a rise of 9.1 percent of the same period last year. The moderate rise in prices of this group is due to the impact of recent appreciation of the Nepalese currency against the US dollar on imported commodities. According to NRB, Nepali currency vis-à-vis US dollar appreciated by 12.79 percent in mid-May in comparison to mid-July 2006.

The exchange rate of one US dollar stood at Rs 65.70 in mid-May 2007 compared to Rs 72.19 in mid-May 2006. As a result, remittance receipt of the country grew at a slower rate.

NRB report further says that Nepal's external sector did not perform satisfactorily in the first ten months of 2006/07. “Exports fell by 0.3 percent in contrast to a growth of 3.3 percent recorded in the same period last year.”

The central bank has attributed the decline to a number of factors such as deteriorating security condition, frequent bandas, lack of investment friendly climate and power shortages.

While exports to India rose by just 1 percent in the first 10 months, exports to other countries declined by 3.1 percent. In the same period last year, exports to India had grown by 8 percent, and exports to other countries had declined by 5.6 percent.

Likewise, the country's total imports rose by 10.5 percent during the period, whereas it had grown by 16 percent in the same period last year.

Imports from India also increased at a slower rate of 11.4 percent and imports from other countries also rose by 9 percent during the period.