1|Page  It should also not be so quickly discounted given the importance of stable inflation expectations in the medium and long-term decision making processes of the private sector-whether it is about investments, savings or wage negotiations.1  Our exchange controls have been effective, not because they are fool proof, but because they provide safeguards around very liquid and mobile financial flows, which if shifted rapidly could destabilise the exchange rate.
Given enough time, people do manage to evade controls but the short-term fallout from such movements is not felt. Meanwhile, the national investment policy provides a check on restricted categories of inflows, because it determines the ease of forming legally binding commercial contracts with non-residents. The downside, however, is that protection can reduce the incentives for expedited structural reforms that would have longer-term benefits.