book1

Figure 3: Retail price of wheat and rice in Kathmandu (nominal NRs per kg)
Nepalese Rupee/kg
162
40
38
36
34
32
30
28
26
24
22
20
18
16
Jul-04 Aug-05 Oct-06 Dec-07 Mar-09 May-10 Jul-11
Legend
Nepal, Kathmandu, Wheat (flour), Retail, (Nepalese Rupee/kg)
Nepal, Kathmandu, Rice (coarse), Retail, (Nepalese Rupee/kg)
Source: FAO 4
Since Nepal does not produce anything like enough food to meet domes� c
food requirement it has to import food equal to domes� c produc� on defi cit.
So, shocks in produc� on, supply and prices of agricultural goods at the global
level aff ect food prices in our local market as well. In 2009, agricultural trade
defi cit was US$270 million, up from US$157 million in 2003. 5 Since the
demand for food doesn’t go down at price surge, Nepal will be impor� ng at
least the same amount of food even if prices skyrocket. That means it has
to spend substan� ally more to import the same quan� ty of food. This will
nega� vely impact the already high trade defi cit and government expenditure
available for other development ac� vi� es. Meanwhile, donors will have to
redirect funds to address rising food prices instead of implemen� ng already
planned development ac� vi� es.
Globally, rising temperatures, shi� ing season pa� ern, more frequent
and extreme weather events, fl ooding, wildfi re, and drought in Russia,
Canada, Australia, Pakistan, China, Argen� na, and Kazakhstan, among others
countries result in produc� on shocks. Meanwhile, supply shocks occur
when major expor� ng na� ons take preemp� ve measures to curb exports or
put embargos on certain agricultural products – so much so that their own
domes� c demand is met and prices remain below a s� pulated threshold
for their ci� zens. For instance, supply shock occurred recently when India,
Russia and Vietnam, among other na� ons imposed food grains embargo.
Addi� onally, specula� on by brokers and investment fi rms, who bet on the
future price of major agricultural items based on account of produc� on,
4. Data extracted from FAO’s GIEWS food price data and analysis tool (h� p://www.fao.org/
giews/pricetool2)
5. Author’s computa� on using UN Comtrade database (h� p://www.comtrade.un.org/)
Changing paradigms of aid eff ec� veness in Nepal