Nepal’s Inflation Trend: CPI Shows Mixed Movement Amid Economic Adjustments

Nepal's year-on-year Consumer Price Index (CPI) data from fiscal year (FY) 2019/20 to mid-April FY 2024/25 reveals a fluctuating inflation trend, reflecting the country's broader economic shifts post-pandemic, supply-side disruptions, and global price volatility.

In FY 2019/20, Nepal recorded a CPI inflation rate of 4.78%, a modest level that aligned with the country’s typical inflation expectations. However, the following fiscal year, 2020/21, saw a slight dip to 4.19%, largely influenced by reduced demand during the COVID-19 pandemic lockdowns, which affected consumption and movement across the country.

The economic rebound in FY 2021/22 was dramatic. Inflation surged to 8.08%, more than doubling from the previous year. This sharp rise was attributed to the post-COVID economic reopening, global commodity price hikes (notably fuel and food), and supply chain bottlenecks. The high inflation rate of this period exerted pressure on household purchasing power and overall consumer confidence.

In FY 2022/23, CPI eased slightly to 7.44%, indicating that while inflation remained high, some moderation had occurred. This period reflected a mix of local currency depreciation, rising import bills, and relatively high global prices—especially food and fuel—which continued to drive inflation upward.

However, in FY 2023/24, the annual inflation dropped significantly to 3.57%, marking a notable improvement. This decline was likely due to improved supply conditions, controlled import bills, and tighter monetary policies by Nepal Rastra Bank to rein in inflation. Yet, the mid-April 2024 snapshot showed a slight uptick to 4.61%, suggesting early signs of inflationary pressure returning, possibly due to increased government spending, election-related expenditures, or new supply chain concerns.

For mid-April FY 2024/25, CPI was recorded at 3.39%, reflecting continued stability in consumer prices. This suggests that despite global uncertainties, Nepal has managed to keep inflation largely under control in recent months. A mix of subdued demand, steady monetary policy, and relatively stable import costs may have contributed to this outcome.

Overall, the CPI data illustrates Nepal’s struggle to balance post-pandemic recovery with inflation control. The volatility between FY 2021/22 and 2022/23 shows how global dynamics strongly affect the domestic economy. Looking ahead, maintaining inflation within the 4-5% range will likely remain a key policy target to support economic growth without eroding household income.