Wednesday, March 2, 2016

Papua New Guinea Government Borrows Over Half a Billion Kina to Stay Afloat

Bryan Kramer
THE VOICE Of PNG, Facebook
(March 01 at 1:25)

O'Neill Government borrowed a further K654 million in the last two weeks to stay afloat. The funds were raised through auctioning of Government Treasury Bills by the Central Bank. K198 million was raised on 17 February 2016 to meet the public servants pay run for payroll 5 and K455 million was raised just last Wednesday's (26/2/16) to ensure this payroll is met.

Central Bank website defines Treasury Bills as a financial debt instrument issued by the Central Bank on behalf of the Government to raise funds in order to finance budget deficits. A budget deficit is when Government expenditure is higher than revenue (spending more than it earns).

In a period of just four months November 2015 to February 2016 O'Neill Government has borrowed K4.1 Billion domestically through the auction of Government Treasury bills. The debt largely held by domestic banks and superannuation funds. This calculates to an average of K1 Billion a month. Record debit and reckless spending on excessive infrastructure contracts is now tipping the country's economy to crisis point.

In just four years in office O'Neil has depleted the PNG's cash reserves and racked up record debt in excess of K25 Billion from only K6 Billion in 2011.

The country's foreign reserves is far below US$1.8 Billion and less than two months cover.

To-date O'Neill has avoided borrowing from international agencies who offer significant lower rates of interest. They also require full disclosure and strict governance on how Government funds are expended This would include scrutiny over how Peter O'Neill awards million kina contracts to those closely associated him. It's my view to avoid any accountability he has opted to borrow funds domestically. 

The concern is that the people's savings held in domestic banks and superannuation funds are being used to keep the Government afloat. It is only a matter of time before domestic funds dry up and the Government operations come to a stand still, leaving future generations with a massive debt burden.

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