Fuel price hike to have cascading effect on essentials

Higher inflation makes consumers pay more for food, rents, fuels

There is an increase in fuel prices (petrol and diesel) by around 19.31% in September

Inflation has increased solidly in September as Bhutanese paid more for food, rents, and fuels.

In September, consumer prices rose to 0.26%, more than expected, and pushed the year-over-year gain to 4.97%, according to the latest data on the Consumer Price Index (CPI).

The uptick in inflation has already hurt consumers, who are likely feeling the higher costs of certain items on their wallets due to higher food prices when compared with a year ago.

However, the CPI is likely to increase in October and November as transport rose to 8.08%, mainly due to an increase in fuel prices (petrol and diesel) by around 19.31% in September.

Economic Affairs Minister Loknath Sharma said the rising inflation is the most hurting currently because of the disruption in the supply chain due to the COVID-19. 

“We are really concerned about the rising costs with rising fuel prices globally, and extra costs put in by the COVID protocols which are dearly between lives and livelihoods,” he said.

According to an economist, Dr. Damber S. Kharka, if inflation is growing fast, then it will really lower down the living standard of the people. It will bring down your real income, and the economy.  “When there is high inflation, it will affect the consumers’ pockets,” he said.

Food prices continue to be the main driver of inflation at 0.56% and non-food prices have increased by 0.01%. Within food, betel nuts, and betel leaves recorded the highest increase with 40.75%, followed by meat and cooking oils with 37.21% and 20.21% respectively.  

The price of eggs and egg-based products is the main contributor with a 6.84% increase and dried fish with 4.60% for food.

Moreover, food and non-alcoholic beverages rose to 2.70%, contributed by an increase in the price of oils and fats by 22.43%, Cereals, and bread by 6.49%, and meat by 6.60%.

According to the CPI report, alcoholic beverages and betel nuts increased by 9.90% due to an increase in betel nuts by 15.50%. Communications dropped by 4.47% in the past one year due to a reduction in call and data charges.

The inflation on the housing and utilities rose to 6.89%, restaurants and hotels by 7.84%, health by 3.07%, recreation and culture by 2.18%.

Meanwhile, the CPI covers the goods and services consumed by the households and a sample of goods and services are selected using the household expenditure data to measure the inflation experienced by the households. Prices of the sampled goods and services are collected from urban areas in 20 Dzongkhags on monthly, quarterly, and annual frequency depending on the price volatility of the items.

The Purchasing Power of Ngultrum (PPN) as measured by the CPI is Nu 64 as of May 2021 compared to December 2012. 

This means that Nu 100 in May 2021 is worth Nu 64 during December 2012. The PPN has dropped by 4.74% in the past 12 months (from September 2020 to September 2021) due to a price increase in the economy.

CPI baskets have a total of 113 items (314 varieties) classified according to the Classification of Individual Consumption According to Purpose (COICOP). A total of about 450 outlets are selected for pricing.

Kinley Yonten from Thimphu