Because of these deficits, public debt was accumulating at an unsustainable rate, and foreign and domestic investors were becoming very nervous about holding Canadian government bonds. As a result, significant risk premiums were built into our interest rates. By 1994, it had become clear that Canada could be facing a potentially very serious debt problem.
With a flexible inflationtargeting mandate for interest-rate policy and funding of fiscal deficit no longer the objective of monetary operations, the desired exchange rate management rests with the Reserve Bank. Ongoing Challenges in Maintaining Independence of the Reserve Bank of India Few important pockets of persistent weakness, however, remain in maintaining independence of the Reserve Bank.