The interest rate in any economy plays a vital role in the financial sector. As it is the cost of borrowing money, or the compensation that we receive for the service of lending money. When we lend money to someone, we are obviously taking a risk, and that demands a price, or compensation. And, it is very important that this rate is determined in a sensible manner.
However, at the end of 2014, the fiscal balance stood at only 3.4% of GDP, and total revenue for the year recorded almost MVR 15 billion. And yet, the one month T-Bill rate is fixed at 7.50%??? Do we still use the terms 'fiscal dominance', and 'lack of fiscal discipline', and high demand to justify these rates?
I think its time we moved towards a sensible interest rate regime. Its time MMA took the lead, and provide sound financial advice to the finance minister.