PNG GOVERNMENT's CASH FLOW PROBLEM WORSENS

By JAMES PEREYAP

A very reliable source has confirmed today that Bank of Papua New Guinea (BPNG) has well over US$2.5 billion foreign currency exchange orders pending release. The source confirmed that ANZ Bank has well over US$900 million requests pending whilst it is believed Westpac and BSP Bank have similar or even more. Other foreign exchange dealers are also having difficulty transacting foreign currency and their requests are pending clearance. The total amount now stands above US$2.5 billion.

BPNG has a foreign reserve of just under US$2 billion and if all the requests are cleared, it would still have US$.5billion outstanding to be cleared. It will be crises!!!

PNG businesses that use foreign currency to import goods from overseas are seriously affected by this foreign currency shortage. Businesses and individuals who wish to remit more than US$10,000 out of PNG are cuing up at the Central Bank for an average of two weeks at least.
This is and will have a lot of flow-on consequences for the country and the people.

PNG Government has a lot of foreign debts including the controversial K3 billion UBS Loan, the K6 billion Chinese Exim Bank Loan and other loans obtained in the recent past. Routine loan repayments are also chipping away a big chunk of the foreign reserves at a very faster rate than one can ever imagine. The Government has already gone passed the GDP/Debt ratio under our fiscal laws and the risks are too high for any foreign lenders to give us new funding to patch the black hole.

On the home front, the Government is having serious cash flow problems to fund the budgeted programs. We are already commencing the 2nd quarter of the year and most of the funds appropriated in the 2015 budget had not been released yet. Many schools are anticipated to close before the end of next term. The Government has been overexposed to debts and owing to the risks, the soft loans like government security bonds are no longer valued by those who traditionally buy them. We are wondering where the Government found the K90 million to dispatch to schools this week.

The so called LNG revenue proceeds will not hit the government coffers until after 2017. The announcement by the Managing Director of National Petroleum Company, Wapu Sonk is another window-dressing statement tutored by the master puppeteer. The proceeds had not arrived at the Central Bank but are kept in offshore accounts and the priorities of those funds are repayment of the UBS Loan and other subcontracting obligations. K415 million plus interest of that first profit would go towards the unusual syndicated borrowing against the anticipated revenue orchestrated to rescue the government’s cash flow problem early this year. And never forget, NPCP is nominated by the Government to participate directly in the Elk/Antelop Gulf LNG project as the State nominee and to attain State’s equity, NPCP needs to raise finance. Where is the money?? and is the Government still credit worthy??

Many thinking experts who are studying our economic situation have advised the government to revise the National Budget and cut down the exorbitant expenditure spree to mitigate the risks but it seems they are hell-bent on spending more because in spending, they make their own money.

Well, at the rate the Central Bank is compromised through the Governor, the Government might print more papers (value-less money) to appease the domestic cash flow problems. However, I doubt the Government will be able to cure the problems with depleting foreign reserves and the consequences thereof.

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