Purchasing power of Ngultrum on the decline

According to the Consumer Price Index (CPI) released by National Statistics Bureau (NSB), the purchasing power of Ngultrum has dropped by 3.69 percent in the last year (from June 2022 to June 2023) due to price increases in the economy.

This means that Nu 100 in June 2023 is equivalent to Nu 58 in December 2012 prices. The inflation as measured is at 3.83 percent, an increase from May at 3.40 percent.

Year-on-year CPI also increased by 3.83 percent in June 2023 compared to the same month last year. The prices increased for both food and non-food by 4.72 percent and 3.08 percent respectively.

From the twelve major divisions, except for transport and communication, the prices for all other divisions increased. The prices for transport decreased by 5.01 percent and that of communication decreased by 0.95 percent.

The reason for the decrease in the price of transportation is likely due to decreases in the fuel prices.

The prices of food and non-alcoholic beverages increased by 4.85 percent, prices for alcoholic beverages and betel nut increased by 2.94 percent and prices for housing and utilities increased by 10.50 percent.

Month-on-month CPI decreased by 0.01 percent from May 2023, with decrease in both food and non-food prices. The prices for food increased by 0.52 percent and the prices for non-food decreased by 0.45 percent.

As compared to the month of May 2023, the price of transport decreased by 1.33 percent, alcoholic beverages and betel nut decreased by 0.43 percent and housing and utilities decreased by 0.28 percent. The price of food and non-alcoholic beverages increased by 0.59 percent.

Food prices contributed to about 34 percent of the overall inflation rate in 2022 and non-food contributing to 66 percent of the total increase. In 2021, food prices were the main driver of the inflation rate contributing to almost 60 percent of the total increase.

Among the 12 major division, food and alcoholic beverages contributed to more than 33 percent of the total increase in 2022, followed by transport with about 33 percent and clothing & footwear with about 13 percent contribution to the total increase.

In 2022, among the twelve major groups, transport recorded the highest increase with 12.59 percent while alcoholic beverages and betel nut recorded the lowest increase with 1.16 percent. All other divisions recorded an increase except for communication which dropped by 1.46 percent.

The purchasing power of a currency is the quantity of goods and services that can be bought with a monetary unit.

Usually, because of rising prices, the purchasing power of a currency deteriorates over time, and it also drops in cases of depreciation and devaluation, and increases with the opposite.

As inflation keeps on rising, the purchasing power of Ngultrum will keep on dropping.

The National Council and National Assembly based in the last session on a story by The Bhutanese asked the government to ask NSB to better capture data as it could be getting underestimated.

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