LONDON: The Bank of England has agreed temporarily to lend money to the government to fight the spread of COVID-19 if funds cannot immediately be raised from debt markets, reviving a measure last widely used during the 2008 financial crisis.
"As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from COVID-19," the BoE said in a joint statement with the finance ministry. The government's overdraft at the BoE currently has borrowing of 400 million pounds, and usage previously peaked at 19.9 billion pounds in 2008.
Philip Shaw, an economist with Investec, said lending by the BoE would only count as monetary financing if the government does not swiftly repay any borrowing as agreed.