One of the functions of many central banks (including in Trinidad and Tobago) is to act as banker to governments. One may ask then, shouldn’t a banker provide credit facilities to its client?
When the banker is a central bank, it is vital to keep in mind that, unlike other banks, this institution has the power to ‘create’ money (including most noticeably, cash); a huge amount of money created by the central bank can then lead to high inflation. The capacity to create money then is why central bankers are concerned about excessive financing of government deficits7.