New Delhi: As protests calling for immediate measures to be taken by the government to solve the economic crisis in Sri Lanka intensify, the central bank in the cash-strapped island nation hiked interest rates by a record 700 basis points on Friday.


Sri Lanka’s central bank said its benchmark lending rate had been raised to 14.5 percent to “stabilise the exchange rate” after the rupee tumbled over 35 percent in a month, reported Agence France-Presse.


Besides, the rate for deposits was also increased by seven percentage points to 13.5 percent.


This came as reports said the island nation’s rupee was the worst-performing currency in the world.


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Sri Lanka’s central bank governor Nandalal Weerasinghe said the attempts to control foreign exchange markets and keep interest rates artificially low in the past year had contributed to the unprecedented economic chaos.


“We are now in damage control mode,” Agence France-Presse reported Weerasinghe as saying at his first press conference since replacing Ajith Cabraal.


He vowed to relax exchange controls introduced by his predecessor Cabraal, who was virtually forced out earlier on Monday with the nation facing bankruptcy.


“We would not have had to make such a sharp increase if rates had been raised incrementally over a period of time,” Weerasinghe said.


The international rating agencies have downgraded the island nation as fears grow that it could default on its $51 billion external debt.


Earlier in March, the Colombo Consumer Price Index rose 18.7 percent, while the food inflation topped 25 percent.


This comes as earlier on Friday the police personnel fired tear gas at scores of students protesting over the economic crisis. The students tried to to march to the national parliament on during their protest on Friday post which the police used water cannons in efforts to disburse the mob.


There has been a growing chorus for Sri Lankan President Gotabaya Rajapaksa’s resignation in view of the economic crisis.