"Mahangee Badyo"

I just got a chance to read some parts of the “Monetary Policy for Fiscal Year 2010/11” put out by Nepal Rastra Bank. (Click here for the entire report) The Rastra Bank reports that the government expenditure “increased by 20.2 percent” in 2009/2010. The report also points out that there was a 20.2% increase in recurrent expenditures driven mostly due to “an upward revision in the salary and allowances of civil servants” and an “increase in the expenditure on special security plan.”  The budget deficit was 13% higher in 2009/10 than in the previous fiscal year.  According to this report the total “number of banks and financial institutions licensed by the NRB has also increased in 2009/10”—in fact, it went up by 12.15%.  Given all these factors that increase liquidity in the economy, it should be no surprise that the NRB estimated the average inflation rate “to remain at 10.5 percent.”