1. On what basis does the CBSL raise interest rates? What is the theory behind this move?
2. Govt is main borrower with LKR 9,000 Billion.
3. When the interest rate is increased by additional 10% what is the additional impact on the LKR 9,000 billion loan-book?
4. Is the CBSL guided by any data-driven document to reach this decision or is it an ad-hoc, gut-driven decision?
5. Each year LKR 2,000 Billion of the total LKR 9,000 billion matures. Average Govt debt is 4.5 years (9,000 divide by 2,000)
6. Additional cost for 4.5 years (average) is LKR 900 Billion (the effect over 4.5 years)
7. The Govt currently cannot sustain the previous local interest rate; with the additional increased burden perhaps the Govt will freeze the payments on maturing Treasury bills and Treasury Bonds?
8. Is anyone aware of the macro-economic effect?
9. Private Sector total Borrowing is LKR 6,000 Billion
10. Additional cost to private sector is LKR 600 Billion – the costs will be passed on to the people – customers. Businesses are joined in their trouble by Customers too.
11. What is the total macro-economic impact / cost?
12. Many people impacted will fall below the poverty line and the Govt will need to look after them too. In short these people will join in the poverty cycle. Govt main responsibility is to break the poverty cycle. BUT today the Govt is doing the opposite.
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