Officials at the Nepal Rastra Bank (NRB), the central monetary authority of the nation, have said that the increase in the price of petroleum products would increase inflation by 0.7-1.82 more than projected, a report said.

epal Samacharpatra cited a latest report by the bank that the increase in the price of kerosene would stimulate the increase in price of consumer goods by 1.81 percent. The increase in the price of kerosene and petrol would add 0.88 percent and that of diesel 1.83 percent to inflation, the report quoted the chief of research department of the bank, Keshav Acharya, as saying.

The bank’s projection of seven percent annual inflation would now reach eight percent. Acharya said the new projection that the inflation would rise by at least 0.7 percent more was made in conscience that the price of petroleum products would not be increased before the next fiscal year.

This is the highest inflation in the last seven years. Economists warned that the situation of continued decrease in government expenditure on social sector while the GNP growth and population increment remained static at around two percent was a sign of danger for national economy. Economist Raghav Dhoj Pant estimates that the inflation would reach double-digits.

Earlier, the banks had said that the inflation was beyond its control and could not be normalised by monetary policies. The latest report by the bank says that the inflation in December 2005 was around nine percent.

Meanwhile, the NRB said trade deficit crossed Rs 41 million at the end of fifth month of this fiscal year. This is 20 percent more than that of last year which was only eight percent.

The report by the Nepal Rastra Bank states that the trade deficit has increased because the export in this period had increased by 6.8 percent while imports increased by 14.8 percent. Last year the import had increased by 10.4 percent and export by 13.2 percent.

Of the total trade deficit, India accounts for more than Rs 24 billion, an increase of 25 percent compared to the previous year. The trade deficit with India had increased by 18.1 percent last year. This year, export to the country has increased by 15.6 percent while import by 34 percent.

Trade deficit with third countries had increased by 13 percent compared to nine percent last year.

Trade deficit has been increasing at alarming rate for the last few years. The most affected is the readymade garment and carpet export to European and American countries.