Central Bank Independence in Transition Economies

7C. Limitations on Lending 

The law prohibits the use of monetary emission to finance the Government 

deficit (Art. 8) and to directly credit budget deficit. Purchases of the Government 

securities on the primary market are also prohibited. However, the Bank may grant 

short term credit to the Government to cover temporary discrepancies between 

revenues and expenditure. The maturity of the credit is restricted to 6 months and its 

amount to 5% of the gross domestic product (Art. 10). The procedures for managing 

the State and regional budgets are specified by the Bank together with the Ministry of 

Economics and Finance (Art. 12). The Bank may grant credit for the production of 

agriculture products according to the list developed in cooperation with the 

Government and, for long term credits only, approved by the Parliament.