ABSTRACT

The distribution of current funds between public and private sectors could be classified under the considerable sequences which has an impact on public and financial segments of economy. The recent years banking crisis had been effected the financial resource allocation as well. In such economies the inadequate capital savings and accumulation are creating difficulties for confinement the public deficits. Under these circumstances the public sector will have to under take high domestic barrowing interest rates and attracts the funds in the whole financial system accordingly. This has called financial pressure situation and by that way the banking system is tended to use outsourcing methods for alternative fund accession. Thus, the banks are seen as an instrument for speculative short-term foreign capital [flows]. Needless to say that, the currency risks could cause new economic system fragilities respectively. In this study, the relation between public deficits and net foreign barrowings of banks in pre-2001 crisis period will be questioned and analyzed.