Stagflation looms large

Decreasing remittances, dwindling forex reserves and widening balance of payment deficit are impossible to be reversed overnight.

Stagflation is often a rare but ominous phenomenon that simultaneously stagnates the economy's growth, but inflation keeps increasing while the economic recovery looks elusive. According to the data on the country's macroeconomic situation released last week by Nepal Rastra Bank, the central monetary authority of Nepal, the consumer price inflation (CPI) during the first five months of the current fiscal year stood at 7.11 percent. Compared to 2.93 percent last year, exceeding the target of containing it at 6.5 percent as set by the Bank's monetary policy for the current fiscal year. But the inflation has spiralled upwards, with the entire banking industry suffocating with a severe crunch of loanable funds in the market, commonly termed as a 'liquidity crisis.