More than 2.7 million people in Nepal need immediate food assistance as high food prices plunge them over the edge, the World Food Programme (WFP) says.

The U.N. agency also warned that it was running out of money and desperately needed more than $40 million to feed hungry people in the Himalayan nation.

Although chronic food insecurity is a persistent problem in Nepal, WFP said the global food crisis had left far more people vulnerable, including villagers in fertile areas.

"Prior to the global food crisis, the most food insecure people were in the remote mountain and hill areas of the mid and far west of Nepal," Richard Ragan, country director for the WFP in Nepal, told AlertNet.

"With the onset of high food prices, we have seen this vulnerability expand to include small farmers and landless people living in the most agriculturally productive areas in the country."

Last year, high energy prices, biofuels, greater emerging market demands and speculation pushed up food costs across the world and sparked riots, strikes and protests in many countries.

Food costs have stabilised in many places, but prices in Nepal remain relatively high because of steep fuel costs which bump up the price of transporting food.

Other factors driving up costs in Nepal include the small number of large rice suppliers, an Indian export ban on lentils and low food stock levels. Major flooding in 2008 has also contributed to problems in Nepal - one of the world's poorest countries.

The majority of the population are subsistence farmers, but many cannot grow enough food for their needs and have to top up with whatever they can afford to buy.

However, price increases of up to 35 percent for key items such as musuro - broken lentils which are an important source of protein for poor families - have made even basic staples unaffordable.

The prices of coarse rice and cooking oil rose 17 percent and 30 percent respectively last year, according to WFP.

"For people that exist on razor thin margins they can ill afford even a 2 percent increase in food expenses," said Ragan.

He described the situation as "very serious" with approximately 80,000 people across the country having less than two months of food stock.

In the rice, wheat and millet-growing districts such as Jumla, Dolpa and Mugu which are the worst-hit, half of households surveyed by WFP have faced food shortages over the last year.

Reports also indicate that acute malnutrition in children under five is above 26 percent in some communities - well above emergency levels.

Ragan said the situation was further compounded by the fact that the affected areas are remote and isolated places, making it difficult and expensive to transport food there.

A $109 million appeal which WFP launched last May is about 60 percent funded, allowing it to help 1.5 million people. Ragan said the agency urgently needed donors to make up the shortfall so that it could assist the remaining 1.2 million people.

Nepal, which is emerging from a decade-long civil war, receives more than 60 percent of the cost of its economic development from international donors including the United Nations.

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