Nepal’s central bank has warned that inflation could rise slightly during the upcoming election period due to increased economic activity. According to the bank’s mid-year review of the 2082/83 monetary policy, while current inflation remains low, factors such as growing remittance inflows and expanded spending during election campaigns are expected to boost overall demand, putting upward pressure on prices.
The government’s mid-year budget review predicts economic growth of just 3.5 per cent for the current fiscal year. The central bank notes that low interest rates, ample liquidity in the financial system, and sufficient foreign reserves provide a strong foundation for investment-led growth. These conditions could support sustainable and broad-based economic expansion despite election-driven spending.
The central bank also highlighted that the recently approved financial sector development strategy is expected to strengthen the sector further, making it more resilient, inclusive, and growth-orientated. Effective implementation of the strategy is seen as key to improving financial stability and boosting long-term economic performance.
Overall, while the election period may lead to temporary inflationary pressures, strong financial fundamentals and strategic reforms in the banking and finance sector are expected to support Nepal’s economic stability and growth in the medium term.