The liberal financial-environment posed a problem not only for the private sector, but also for the public sector, particularly the monetary authorities. Rigidity in exchange rate system and the lack of political will to tighten fiscal policy in the wake of an overheating economy, sent a warning signal worldwide of the unsustainability of the country’s economic problems. Pressure was also put on monetary policy which was further constrained by its inability to act autonomously. The high interest rate policy, in turn, encouraged further foreign capital inflows, which further exacerbated the already overheating economy.