Failing Monetary Policy Hinders War Financing

February 2008 | Economic Alert

BMI View: Maintaining interest rates steady despite rising inflation has so far helped the government prevent a surge in the cost of financing its war footing, but the Central Bank of Sri Lanka (CBSL) will likely find it increasingly difficult to not react to rising prices. If the government is serious about coaxing down the market interest rate so it can issue securities, the CBSL will have to consider raising the repo rate to curb inflation.

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