Such independence has often been associated with the powers to limit credit to the government, given the destabilizing effect of central bank lending to finance public sector deficits. Governments should be forced to balance their budgets or borrow at market rates to finance their deficits.
Although this might be a problem for countries with under-developed financial markets, the effect in promoting fiscal discipline and facilitating the achievement of growth objectives is deemed to be more profound. An independent central bank should ensure that its policy intervention is well coordinated in the context of the overall government economic policies and objectives.