Runaway inflation hit Nepal after having years of slow growth due to Covid-19 pandemic.
With food and fuel prices through the roof, the Nepali economy could encounter another setback. And there is rise in poverty, economists say.
In a move that has raised hope among the people of seeing some break. So, the Industry, Commerce, Labour and Consumer Welfare Protection Committee of Parliament on Friday directed the government to slash the taxes on petroleum products by half.
But experts say it’s easier said than done. Taxes on fuel imports are among the government’s most important revenue sources. And it is reluctant to give up the bonus created by rising oil prices.
In the first 11 months of the fiscal year ended mid-June, Nepal’s fuel import bill almost doubled from the previous year. And Imports valued at Rs340 billion, compared to Rs191.18 billion in the same period last year.
On June 19, the Nepal Oil Corporation increased the prices of petrol by a steep Rs21 per litre, and diesel and kerosene by Rs27 per litre. This is the highest increment ever made by the oil monopoly. Following the price hikes, petrol costs Rs199 per litre, diesel Rs192 per litre and kerosene Rs192 per litre.
The Russian invasion of Ukraine has pushed up inflation, and most countries have experienced rising prices since last year. Fuel, as measured by world oil prices, and international food prices rose throughout 2021 and the trend continued in 2022.
“Rising inflation could impact economic growth as investors tend not to invest and consumers tend to cut their expenses and eat less. Thus reducing the flow of money in the market,” economist Govinda Nepal told the Post in a recent interview.
