Worried by the indiscriminate borrowing by State governments from banks and the capital market, the Federal Government has commenced a process to check such borrowing.
Consequently, the Fiscal Responsibility Commission, (FRC), has issued a guideline on conditions a state government must meet before borrowing from any bank in the country.
The Head, Directorate of Legal, Investigation and Enforcement at the Commission, Barrister Charles Abana, disclosed this at the Growth Initiative for Fiscal Transparency, (GIFT) parley with Civil Society Partners, in Abuja, on Monday.
The Commission, he said, was shocked to find out that most banks in the country lure state governments into securing loans.
His words: At the Commission, we have decided to give them the template; and we will go ahead to make sure that the CBN issues a proper guideline to banks on how to go about getting all the necessary requirements and compliance fulfilled before lending to the States; unlike in the past, when they just go to the Minister and the Debt Management Office, (DMO).
Speaking on the 2024-2026 Medium-Term Expenditure Framework, (MTEF), Abana noted that the countrys fiscal deficit (including project tied loans) as a percentage of GDP will keep increasing over the medium term from 3.83 percent, 3.89 percent and 3.92 percent respectively of the projected GDP.
Borrowing will increase over the three years while foreign borrowing will increase in the first two years of the medium-term, he stated.
