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Local Asset Ratio

The Local Asset Ratio (LAR) has been used by the Central Bank as a monetary policy instrument and indirectly by the government as a direct source of financing. This tool requires commercial banks to invest a specific percentage of their local currency deposit liabilities in government securities and other claims on government and has been an important vehicle for funding government deficits since its inception in 1986.

The ratio which changed on a number of occasions was last adjusted in July 2009 when it was reduced from 40% to 35%. This was in line with the aim of CBS to gradually reduce the ratio and phase it out within the context of the new Monetary Policy Framework.

As of August 17, 2009 the LAR has been abolished.