Crowding Out Effect?

Data collected by the IMF in the latest review of the Stand-By Agreement show that the banking sector still had a loan to deposit ratio 55.8% in 2009, suggesting banks are only deploying a fraction of their available funds to local businesses. There thus a risk that excessive borrowing by the government is crowding out credit to the private sector. To be sure, officially-reported statistics show that credit to the public sector accounts for only 9.4% of loans, but this does not include exposures to government-owned or controlled entities that are nominally part of the private sector.

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