Data available on the implementation of the 2008 budget shows that government domestic borrowing is increasing in favour of sources from non-bank financial institutions.Sources of funds to finance the GH¢283.91 million overall budget deficit recorded for the first quarter of this year reveal that non-bank financial institutions provided the highest to the tune of GH¢175.2 million, representing 234.3 percent increase over the amount borrowed from them same period last year.Borrowing from the deposit money banks, however, reduced from GH¢128.41 recorded in the first quarter of last year to GH¢40.43 million this year while borrowing from Bank of Ghana (BoG) reduced from GH¢44.69 million to GH¢41.73 million.Analysts believe that it is not a healthy development on the nation's balance sheet considering that non-bank financial institutions charge abysmally high interest rates on moneys lent to their clients.The annual percentage rates of the domestic money banking and the non-bank institutions published by the BoG for February this year indicate that the former charged between 23.39 and 41 percent on moneys lent to individuals while the latter charged between 58.57 to 90 percent.On moneys lent to business customers, the domestic money banks charged between 22 and 39.05 percent per annum while the non-banks charged between 58.57 and 134 percent per annum.Consequently, the Monetary Policy Committee (MPC) Fiscal Development Report for the month of May notes the fast expanding pace of government interest payments in the first quarter.According to the report, "Interest payments for the period have generally been on the higher side possibly as a result of relatively higher interest rates."It added: "total interest payments for the period under review amounted to GH¢124.68 million (0.77 percent of GDP) compared with GH¢70.04 million (0.50 percent of GDP) paid for the same period in 2007.Unlike in 2007 where a proportion of 19.20 percent of the annual target was paid in the first quarter, in 2008 the proportion is 26.06 percent."As a ratio of total expenditure recorded for the first quarter, government interest payment represents 9.0 percent, compared to 6.0 percent for the record of the same period last year.Amidst the concerns of the global food inflation and the pass through effects of the escalating world crude oil on consumer price index inflation, analysts have urged government to reduce spending in order to curb inflationary pressure."This is necessary to complement the monetary policy of the BoG," one analyst opined.The GH¢Z83.9 million fiscal deficit posted for the period is 1.74 percent of GDP, a way higher than the GH¢164.76 million (1.18 percent of GDP) registered for the same period last year.Source: Business & Financial Times