Cash-strapped Sri Lanka's central bank hiked interest rates by a record 700 basis points Friday, in a bid to support the tumbling rupee as the country faces a dire economic crisis.
The Central Bank of Sri Lanka said its benchmark lending rate was raised to 14.5 per cent to "stabilise the exchange rate" after the rupee depreciated over 35 per cent in a month.
The deposit rate was also increased by seven percentage points to 13.5 per cent amid reports that Sri Lanka's rupee was the world's worst performer, overtaking the Russian ruble.
The central bank said the shock-treatment rate hike was due to its belief that the embattled island's inflation, which is already at record high levels, could get worse.
ALSO READ: Sri Lanka opposition threatens no-confidence motion
The Colombo Consumer Price Index rose 18.7 per cent in March while food inflation was at over 25 per cent, with private analysts placing inflation at over 50 per cent in March.
International rating agencies have downgraded Sri Lanka as fears grew that it could default on its $51 billion external debt as foreign reserves fell below $2.0 billion at the end of March.
ALSO READ: Sri Lanka must restructure $1b debt: Ex finance minister
As economic hardships brought on by shortages of food, fuel and electricity led to widespread anti-government protests across the country, there were also calls for President Gotabaya Rajapaksa to resign.
The government has announced it will seek an IMF bailout, but talks are yet to begin.
