The approval was unanimous, this time with the support of the private bank sector.
"Tulio García, representative of the private sector at the WB, said that opposing the decision of the board was a lost cause, so they opted to seek the Government's commitment for the fiscal 2011 deficit not to exceed 2.7 percent of gross domestic product (GDP) and wait for the year to end between 3.1 to 3.4 percent of GDP," writes Lorena Alvarez from Elperiodico.com.gt.
The Monetary Board (JM) authorized the issuance of $ 210 million in treasury bonds by the Ministry of Finance.
If approved by Congress, the Government's deficit this year would reach 3.4% of GDP.
Elperiodico.com.gt reports, "Julio Suarez, vice president of Banguat, announced that JM endorsed his opinion of an increase in public debt, although representatives of the private banking and corporate sectors opposed it."
Experts foresee increased interest rates, exchange rate variations, liquidity issues, domestic credit shortages and more inflation.
Investors would be drawn to the superior interest rates paid by government securities, taking money out of the market and into the State Treasury, limiting the capacity of banks to lend to private companies.