Inflation has jumped to a 40-month high of 11.6 percent, thanks to the prolonged Tarai unrest which led to disruptions in transport system through southern parts of the country, according to the Nepal Rastra Bank.

The last time inflation had soared to this high was in mid-August 2012 when it reached 11.9 percent. In mid-September the same year, inflation was recorded at 11.2 percent before it started to decline.

Prices of pulses, legumes, ghee and oil among other food products and clothes and footwear among non-food products have skyrocketed.

“There have been two spikes in prices: 48.9 percent in pulses and legumes subgroup and of 42.3 percent in ghee and oil subgroup,” the central bank said in its latest report on country’s macro economy.

Nara Bahadur Thapa, chief of NRB’s research department, said that consistent high demand for pulses and legumes as well as ghee and oil amid shortages was the main factors behind the sharp rise in prices. “Raw materials needed to produce cooking oil could not be brought due to disruptions in transportation, but demand remained the same,” he said.  

According to the central bank’s statistics, the highest price rise (13.2 percent) was recorded in the Kathmandu Valley, followed by the hilly region, mountain region and the Tarai.  

Kathmandu is the largest consumption centre.

 “Kathmandu does not locally produce food items that people consume,” Thapa added. “In the mountains, prices are already high, so percentage-wise price rise appears to be low.”

Usually, Nepal’s inflation is heavily influenced by price movements in India because two-thirds of its imports originate there.

This time, however, there was a massive deviation from the trend, with Nepal witnessing double-digit inflation compared to India’s 5.6 percent, revealing an inflation wedge of 6 percent in the review period. A year ago, inflation in Nepal was recorded at 7 percent compared to 4.9 percent in India, reflecting a narrower inflation wedge of 2.1 percent.

“The rise in the inflation wedge between Nepal and India was caused by the lingering impact of the April-May 2015 earthquakes, unrest in the southern plains and recent disturbances on the highways in the southern parts of the country,” NRB said.