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| Source: https://www.aljazeera.com/ |
I have listed out few possible economic effects of the ongoing conflict between Russia and Ukraine on Nepalese economy.
1. High possibility of rising in price levels: Russia is the second-largest producer of crude oil in the world. With the escalation of tension between Russia and Ukraine, the crude oil price has skyrocketed above $100 per barrel and is even expected to go higher than $150 per barrel. The second reason for the rising price level is due to a shortage of edibles including sunflower and Soyabean oils as Nepal imports 96 percent of crude sunflower oil from Ukraine. Likewise, about 32 percent of dried peas are imported from Russia. Nepal imports mustard seeds from India and Russia.
2. Reduction in growth: Growth reduction seems unstoppable. Industrial raw materials such as Rubber, coal are imported from Russia.
3. Effect on BoP: crude oil comprises of 20 percent of imports. Rising oil prices hit escalates import prices further stressing BoP deficit.
4. Possible reduction in remittances: the global slowdown is probable due to rising oil prices backed by chip shortages.
5. Acute pressure on reserve position seems inevitable.
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