In 2009 the National Bank of Tajikistan (NBT, the central bank) made four cuts in the refinancing rate, from 13.5% at end-2008 to 8% in July. This was partly to reduce the cost of government-backed loans to state enterprises, but was also an attempt to encourage bank lending to sustain domestic demand. In October 2010 the NBT raised the rate to 8.25%, in view of an acceleration in consumer price inflation, and raised it again in February 2011, to 9%. However, in the light of the undeveloped nature of the financial sector, movements in the refinancing rate have little impact on the real economy, so external factors such as global trends in energy and food prices are the main influences on inflation. Weak institutional capacity and the NBT's low capitalisation will continue to constrain its conduct of monetary policy throughout 2011-12. Modest improvements can nevertheless be expected by end-2012, as banking sector reforms should gradually lead to greater operational efficiency of the country's banks and increased public confidence in the sector.