UK central bank to finance government spending in fighting coronavirus

The Treasury and the Bank of England agreed Thursday to temporarily extend the use of the Ways and Means (WM) facility, enabling the government to borrow from the bank to fund its fight against the novel coronavirus pandemic.

Any use of the WM facility, which functions as the government's overdraft account with the bank, will be "temporary and short-term", and any drawings will be repaid as soon as possible before the end of the year, said a joint statement.

"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," said the statement.

The government will continue to use the markets as its primary source of financing, and its response to COVID-19 pandemic will be fully funded by additional borrowing through normal debt management operations, the statement said.

The bank cut interest rate to record low of 0.1 percent in two emergency moves in March, warning the coronavirus outbreak will cause "sharp and large" economic shock.

(ASIA PACIFIC DAILY)