The earthquakes in April and May and protests and trade disruptions following the promulgation of a new constitution in September have exacerbated the macroeconomic policy challenges facing the Nepalese economy. Real GDP growth is estimated to have decelerated to 3.4 percent in 2014/15 (mid-July 2014 to mid-July 2015) from 5.5 percent in 2013/14. Inflation had been moderating from a high base but the recent acceleration to 6.9 percent in August (y/y) widens the wedge over Indian CPI, thereby undermining Nepal’s competitiveness given the exchange rate peg to the Indian rupee. The financing data indicates that the budget was in surplus for the third year in a row, even as revenues fell short of the budget for the first time in several years. As a result, public debt remained on a declining path, falling to 26 percent of GDP in 2014/15, from 32 percent of GDP in 2012/13. The external current account surplus reached 5.0 percent of GDP in 2014/15, aided by a surge in remittances following the earthquake and lower oil import prices. Reserves rose to US$7.2 billion, or 33 percent of GDP, covering almost eight months of prospective imports.