Lifting rate cap to hit government with expensive debt

Removal of the rate cap may result in more expensive debt for the Government. [Photo: Courtesy]

Removal of the rate cap may result in more expensive debt for the Government. This may also not sort out the decline of credit to the private sector, rating agency Moody’s has warned.

The rating agency affirmed that Treasury runs twin risks if it is to play the largest borrower in the domestic market including continuing to squeeze out the private sector and facing huge costs once the rate cap law is lifted and banks adjust lending rates upwards.