The central bank of Nepal reports that CPI has shot up to 7.2% in the first eight months of the current fiscal year. Reason: substantial increase in prices of rice, oil, and ghee. I guess I don't have to explain the relationship between rising food prices and general price level.
According to the report, food and beverages became dearer by 9.4 percent over this period, as the prices of oil and ghee increased by 27.3 percent, grains and cereal products by 14.9 percent and pulses by 13.7 percent.
At a time when economic growth rate is just over 2%, population growth is 2.2%, and inflation at 7.2%, one can easily imagine how fragile is the Nepali economy. But, things are going to get better, if the upcoming government led by the Maoists boost individual and market incentives. Already, foreign exchange reserves are record high (at Rs181.98 billion) and remittances grew by 28.1%. On top of that, travel receipts are up by 76.3%. Things are getting better but management of fiscal and monetary balance requires prudent policy choices.