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Nepal's Central Bank Says Inflation Over 5 Per Cent Due to Oil Price Rise

Posted on: Tuesday, 13 December 2005, 09:00 CST

Excerpt from report by Nepalese daily newspaper Nepal Samacharpatra on 13 December

Kathmandu: The inflation during the first three months of the current fiscal year 2005/06 [Nepal fiscal year begins mid-July] has reached 5.6 per cent. The rise in inflation is due to last year's increase in the price of petroleum products and increase in the cost of production of agricultural products.

At a time when the economic growth rate (around 2 per cent) is less than the population growth rate, an inflation of over 5 per cent is regarded very sensitive for economic development.

The governor of the Nepal Rastra Bank [central bank], Bijaya Nath Bhattarai, said that the continuous increase in the prices of petroleum products in the international market and the loss in the Nepal Oil Corporation, which is becoming unbearable, would further increase inflation.

While making public the monetary policy in July, the central bank had said that it would try to limit inflation to 4 per cent.

"In a country like Nepal, we cannot limit inflation through monetary instruments. We have 1,700 km-long open border and other various reasons have caused the inflation to go out of our control," Bhattarai said, while making public the bank's first quarter's macroeconomic report on Monday [12 December]. [passage omitted]

Source: BBC Monitoring South Asia

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