Commercial Banks lost confidence in PNG Government : Polye

Commercial Banks in PNG lost confidence in  Government : Prime Minister Peter O'Neill resorts to International Monetary Funds for US$250 million Loan

The commercial banks in the country have lost appetite for the government’s treasury bills to raise revenues to meet its expenditures, the Opposition Leader Don Polye said.

And Mr Polye said the Prime Minister Peter O’Neill had resorted to US$250 million loan from the International Monetary Fund to address the back log of foreign exchange orders in the Central Bank for imports.

He added that the Prime Minister turned to the bank after the government’s debut in issuing K2.5 billion sovereign bond did not attract other banks in the international stock market due to its ‘appalling economic profile.’

“Last week the government was trying to raise about K330 million through the treasury bills, but it only raised K201 million. That means the local market has lost appetite.

The Government has failed to raise about K1 billion so far because there is no money coming into the country for the government to meet its basic expenditure like health and education, and other essential services,” he said.

He further said there was no guarantee for the government to repay their loans.

“About K4 billion, which would have been flowing into the country from the sales of LNG, has been mortgaged to an Escrow account in Singapore to service the UBS loan.

“The downturn in commodity prices has exacerbated the situation,” he said.

Polye has queried what the government could do next, saying a solution has to be provided.

“So here the Prime Minister Peter O’Neill has resorted to IMF unless the situation improves due to other factors.

Mr Polye said he sees IMF as the last resort where a country comes to a situation where banks have lost confidence, the concessional loans from ADB or other regional banks and development partners who have given money through the multilateral or bilateral relationships.

He added, however, that country still has problems as it cannot alleviate its given economic condition, then is becomes a concern to that economy.

Polye said PNG is no exception.

“If the government has not borrowed that loan, we would have seen that money coming in to cushion the downturn in commodity prices or cash flow problem we are facing today.

“As a result of that very bad decision to get a very bad loan to mingle with an economic oil prices in the market today is eroding the cash flow,” said a well-versed Polye.

Meanwhile, he has commended IMF for the loan as they have better strategies for the country on how to create a sustainable economy and sound economy.

“Other countries may not see that important role which IMF plays. Sometimes leaders of other economies may say they are interfering into their domestic affairs.

“But I am one of them, who believe international organisations which have fine set ups so that nations like PNG can be linked to or guided,” he said.