Inflation has reached its highest level in nearly a year, raising concerns about growing economic pressure as tensions in the Middle East threaten global supply chains and the country’s remittance-driven economy.
According to the latest data from Nepal Rastra Bank, inflation stood at 3.25 per cent in the month of Magh in the current fiscal year. This marks the highest inflation rate in the past 11 months. The rate had been 2.42 per cent in Poush and 1.63 per cent in Mangsir, indicating a steady rise in recent months.
Economists say the increase reflects a gradual return of consumer demand after a long period of weak market activity. However, global developments could push prices even higher in the coming months.
Nepal’s heavy reliance on imports, particularly fuel, makes the economy vulnerable to disruptions in international supply chains. Petroleum products alone account for more than 14 per cent of the country’s total imports, which reached Rs 939 billion by mid-February. Since Nepal imports fuel through India, supply disruptions or price shocks linked to tensions in the Middle East could quickly affect domestic markets.
There are also concerns that the conflict could impact remittance inflows if instability spreads across major labour destination countries such as Qatar, the United Arab Emirates, Kuwait, and Saudi Arabia. Remittances remain a key pillar of Nepal’s economy, reaching Rs 1.26 trillion in the first seven months of the current fiscal year, nearly 40 per cent higher than the same period last year.
While foreign exchange reserves remain strong at around Rs 3.3 trillion, analysts warn that prolonged geopolitical tensions could eventually affect labour migration, remittance flows, and tourism.