Inflation rises to 5.96% in first month of fiscal year

The annual consumer price inflation rose to 5.96% in the first month of the current fiscal year 2026/27, according to data from Nepal Rastra Bank. The rate is above the central bank’s annual inflation target of 5.5%.

Inflation has accelerated sharply from 1.68% recorded in Shrawan (mid-July to mid-August) last year.

Food and beverage prices increased by 6.77% during the month. Prices of ghee and edible oils recorded the highest increase at 15.62%, followed by fruits at 15.39%, fish and meat at 8.65%, vegetables at 6.90%, and spices at 4.80%.

Among non-food items and services, transportation costs rose 13.17%, while alcoholic beverages increased by 7.20%. Prices of clothing and footwear rose by 5.52%, while tobacco products became 4.97% more expensive.

Meanwhile, foreign exchange reserves increased 1.2% to NRs 3.946 trillion by mid-August. However, the reserves’ capacity to finance imports declined. Reserves could cover 21.8 months of merchandise imports and 18.8 months of merchandise and services imports, down from 23 months and 19.6 months, respectively, at the end of the previous fiscal year.

The decline in import-cover capacity came despite the increase in reserves, partly because rising prices have increased the amount of foreign currency required to finance imports. The US dollar appreciated by 0.9% against the Nepali rupee during the month.

Nepal’s imports also increased significantly, rising 31.01% during the month to about NRs 187 billion. The price of crude petroleum rose to $92.02 per barrel, up 36.7% from $67.30 a year earlier, adding further pressure to import costs.

Despite the rise in inflation, Nepal recorded a current account surplus of NRs 94.59 billion and a balance-of-payments surplus of NRs 90.34 billion in Shrawan.

The latest figures indicate that inflationary pressure has strengthened at the start of the fiscal year, even as Nepal continues to maintain a substantial foreign exchange reserve position.

Remittance inflows rise 21.2%

Meanwhile, remittance inflows increased 21.2 percent in the first month of the fiscal year, with Nepal receiving NRs 215.05 billion by mid-August.

The increase came despite a slight decline in the number of Nepalis receiving final labor approval to leave the country for foreign employment. The rise in the US dollar exchange rate also contributed to higher remittance receipts in rupee terms.

A total of 42,693 people received final labor approval for foreign employment in Shrawan, down from 44,466 during the same month last year.

However, the number of workers obtaining re-entry labor approval increased to 27,748, compared with 23,644 a year earlier.