Annual Average Inflation: Comparing Nepal’s Last 5 Fiscal Years

Nepal’s annual average inflation (CPI period average) has moved through distinct phases over the past five years, reflecting both domestic conditions and global economic shifts. In FY 2020/21, average inflation was 3.60%, a relatively low and stable level as the economy began emerging from the pandemic slowdown. The following year, FY 2021/22, saw a sharp surge to 6.32%, driven by rising global fuel and food prices, supply chain disruptions, and imported inflation. This upward trend continued into FY 2022/23, when average inflation peaked at 7.74%, the highest in the five-year period, heavily straining household budgets and reducing real wage gains.

The picture improved in FY 2023/24, with inflation easing to 5.44%, supported by stabilizing international commodity prices, stronger foreign reserves, and moderating demand. By FY 2024/25, the average inflation rate cooled further to 4.06%, with mid-August 2082/83 data showing it at just 1.68% year-on-year, signaling a rare phase of price stability. The contrast between the highs of FY 2022/23 and the lows of FY 2082/83 highlights how quickly Nepal’s inflation environment can shift, shaped by external imports, remittance-driven demand, and domestic agricultural supply.

For households, these swings in inflation mean that periods of high cost-of-living pressure were followed by short-lived relief. For policymakers, the lesson is clear: while inflation has moderated, structural vulnerabilities remain. Heavy reliance on imports, exposure to global oil and food price shocks, and supply bottlenecks mean inflation can quickly resurface. Long-term stability requires boosting domestic food production, improving supply chains, and reducing dependency on volatile imports.