Central Bank Governor Dier tong | Credit | Emmanuel Akile/Eye Radio

The central bank has acknowledged that lending money to the government is harmful to the economy of the country.

The financial institution has been lending money to the government to meet its yearly budgets.

Last month, the International Monetary Fund advised the bank to tighten monetary policies and refrain from lending to the government to keep inflation of a decelerating path and gradually replenish foreign exchange reserves.

The IMF also called on the government to restore budgetary discipline, strengthen oil management and transparency.

“We have discussed these issues since last year that excessive lending to the government, printing money to support budget is harmful for our economy,” BOSS governor, Dier Tong said.

This, he says, is “because it will result in higher inflation, and higher inflation will discourage investment, it will discourage production.”

However, during its two-day quarterly meeting in Juba earlier this week, the board of directors of central bank observed that the country’s domestic outlook is beginning to feature positive developments.

“One of the reasons … is because we have cut down significantly lending to the government,” Mr Tong said.

The primary function of the central bank is to control the money supply in the economy and is responsible for issuing currency on behalf of the government.

It also keeps the cash reserves of the commercial banks and acts as a clearing-house for the inter-bank transactions and as a lender of last resort.