This channel has two apparent advantages to the government; for one thing, it is cheap, at least in the short run. In addition, bank financing does not show up in the official measurements of the budget deficit, which reduces the possibilities for public scrutiny.
Although state-owned banks are most prone to this kind of political exploitation, privately-owned banks can also function as quasi-fiscal agents, for example when they are forced to lend to particular sectors or industries. Obviously, these financing practices reduce the viability of banks in the medium and long term. 9.