Near-term risks to the outlook are tilted to the downside, reflecting the potential for fiscal deficit financing
difficulties to force a sharp consolidation, together with increasing distortions associated with the FX shortage.
The IMF has said that it is ready to help Sri Lanka cap its central bank deficit financing
Debt has become an important source of deficit financing
that reduces the pace of drawdowns from government reserves.
The target ceiling for deficit financing
in the EU is 3 percent.
However, the fiscal position remains under pressure, with deficit financing
needs requiring domestic borrowing in the form of central bank credit and further use of government deposits.
He disclosed that the central bank support to the agricultural sector amounted to 3 billion pounds a matter that led to the increase of inflation and the exchange rate due to deficit financing
to the agriculture sector.
According to the BCT, deficit financing
during the first 5 months of 2016 was mainly ensured by intensive recourse to domestic financing.
The deficit financing
will take into account the best financing options available, including borrowing from the local and international markets; the scheme will be designed so not to adversely affect domestic liquidity to ensure Private Sector growth.
In other words, deficit financing
has resulted in "too many South Sudanese pounds chasing too few dollars.
S&P believes that in these two countries, debt or Sukuk issuance are more likely as a source of deficit financing
than for other GCC members.
The government is now expected to issue debt as part of its deficit financing
strategy," it said.
This new financing strategy should reduce the pressure on foreign reserves as the main deficit financing
tool, Jadwa Investment said in its Quarterly Oil Market Update.