The recently unveiled Current Macroeconomic and Financial Situation Report of Nepal for the first five months of FY 2024/25 highlights a concerning rise in inflation. Consumer price inflation reached 6.05% in mid-December 2024, exceeding the government’s target of 5.5% for FY 2024/25. This marks a significant year-on-year rise of 1.1 percentage points compared to 4.95% in the corresponding period of the previous year.
The increase in inflation is largely driven by the food and beverage segment, where inflation surged to 9.99%, almost doubling from the previous year. The price index for vegetables soared by 43.05%, and pulses and legumes rose by 10.66%. Similarly, the prices of cereal grains, ghee, and oil also saw increases of over 9%. In contrast, inflation in non-food and services stood at a relatively moderate 3.92%.
Geographically, inflation in rural areas was 6.52%, higher than the urban areas, which saw an increase of 5.89%. Provincially, Koshi Province had the highest inflation rate at 7.36%, while Karnali Province recorded the lowest at 4.19%. In the Mountain areas, inflation reached 6.58%, while the Terai region saw inflation at 6.31%. Inflation in the Kathmandu Valley stood at 5.82%, and in the Hill region, it was 5.65%.
The report underscores significant pressures on Nepal’s economy, particularly due to rising food prices. These inflationary trends are more pronounced in rural areas and provinces like Koshi, highlighting regional disparities. The Nepal Rastra Bank (NRB) has committed to maintaining price stability, a goal that will be increasingly critical to mitigate these inflationary challenges.
