With everything becoming costlier by the day, Sundar Pudasaini of Balaju has had to cut down on his food expenses—no more eggs, milk and meat from now on.

The cost of living is rising sharply for Nepali householders. Grocery bills, children’s school fees, housing costs and transport fares all have gone up. Daily essentials like rice, flour, soybean oil, mustard oil, lentils, potato, onion, garlic, sugar, soft drinks and vegetables have become dearer.

“We cannot afford to eat eggs, milk and meat on a regular basis,” said Pudasaini, the sole breadwinner of a family of five.

“Forget about buying fruits. A kilo of apples costs more than Rs300, and a dozen bananas are priced at more than Rs150,” said Pudasaini, who works in a trading company.

Experts say that people have started spending less on food as their incomes have stagnated.

Despite the hard economic times, Nepal has been doing better in tackling hunger than its South Asian neighbours, according to the recently released 2023 Global Hunger Index (GHI).

Nepal has been ranked 69th out of the 125 countries reviewed, and received a score of 15 which means a moderate level of hunger. A score of more than 50 reveals an extremely alarming level of hunger.

The listing, jointly published by international aid agencies Concern Worldwide and Welthungerhilfe, shows Nepal performed better than its regional peers—Afghanistan (114th), India (111th), Pakistan (102nd) and Bangladesh (81st).

Sri Lanka came ahead of Nepal in the 60th position.

GHI scores are based on the values of four key indicators—child stunting, child wasting, under-nourishment and child mortality.

According to the report, based on the values of the four indicators, a GHI score is calculated on a 100-point scale reflecting the severity of hunger, where 0 is the best possible score (no hunger) and 100 is the worst.

A GHI score of more than 50 is classified as extremely alarming, 35-49.9 as alarming, 20-34.9 as serious, 10.0-19.9 as moderate and less than 9.9 as low.

Nepal's GHI score in 2000 was 37.2, which improved to 29 in 2008 and further improved to 21.3 in 2015.

Experts, however, say there is nothing to be happy about. Nepal has been under the stress of high inflation for the past few years, causing a large section of the population to cut spending on food and other necessities.

“If inflation rises, it will not only impact people in the low-income bracket but also those in the middle-income bracket. Consequently, the poverty rate will rise as people begin to slash their food budgets. The low access to nutritious food affects overall human development eventually,” said sociologist GS Khatri.

“If incomes do not increase and inflation keeps rising, children, in particular, will be deprived of quality and nutritious food. Remittance, most of which is spent on household expenses, could have improved Nepal’s position in the GHI,” Khatri said.

"But if prices kept rising, the only option is to cut expenditure on food," he said.

According to Nepal Rastra Bank, the year-on-year consumer price inflation stood at 7.52 percent in mid-August 2023 compared to 8.26 percent a year ago.

Economists say that the year-on-year inflation has dropped, but the August 2023 inflation rate has been calculated from the 8.26 percent base, which shows that inflation is very high.

The central bank said that food and beverage inflation stood at 8.95 percent while non-food and service inflation stood at 6.42 percent in the review month.

Under the food and beverage category, the year-on-year price index of the spices sub-category increased 45.56 percent, cereal grains and their products 13.20 percent, milk products and eggs 12.19 percent and vegetables 10.80 percent.

Economist Jagadish Chandra Pokharel says poverty and hunger are falling, but there are still issues in certain geographic areas and communities in Nepal, and the rising inflation rate in recent years will impact people of these areas and communities.

"Though the country has made improvements in reducing hunger at the national level, the government needs to bring targeted policies to address the areas where the rates of malnutrition and hunger are high," Pokharel said.

Nepal’s policy is also not too favourable for consumers struggling under rising prices.

“As inflation does not touch the rich political leaders and people who frame the policies, they seem least bothered with price hikes,” Khatri said.

For example, despite providing relief to consumers, the government began the new fiscal year with 13 percent VAT on imported vegetables and other food items on top of the 9 percent agriculture service charge. The total tax on imported food items is 23.5 percent.

The Financial Bill has imposed 13 percent VAT on imported onions, potatoes, garlic, peas, frozen green leafy vegetables, collard greens, beans, spinach, sweet corn and other green vegetables.

Experts said inflation was already high in Nepal, and the new taxes would cause an inflationary burst this year.

Imported foods are costlier, so domestic foods are also priced higher to put them on the same level because traders don't want to sell cheaper goods, insiders say.

Hence, the market makes an automatic adjustment in the prices of imported and domestic foods and bring them to the same level, making both equally expensive for consumers.

According to a publication titled The Global Food Price Crisis Threatens to Cause a Global Nutrition Crisis: New Evidence from 1.27 million Young Children on the Effects of Inflation produced by the International Food Policy Research Institute last December, food inflation in the womb and first years of life is associated with greater risks of child wasting in the short run and stunting in the long run.

Food inflation also poses larger wasting risks for children of poor and landless rural households, exacerbating existing inequalities.

Increases in international food prices are clearly a threat to the welfare of the poor, especially after the severe impacts of Covid-19 on poverty and malnutrition.

The report suggested that rises in food, fuel and fertiliser prices are associated with poverty increases in the short run, even if rural economies can benefit from higher prices in the longer run.

“We are now amid the third international price spike in 15 years, as food prices surged upward in late 2021 due to the tailwinds of the Covid-19 pandemic, before skyrocketing in the wake of Russia’s invasion of Ukraine,” the report said.

By March 2022, according to the UN’s Food and Agriculture Organisation, the international food price index had reached an all-time high, 116 percent greater than its 2,000 value—higher even than the peaks reached in the 2007-08 crisis.