By MATTHEW VARI
Sunday, October 4, 2015 (Sunday Chronicle, PNG)
LEADER of the Opposition and Member for Kandep, Don Polye, raised concerns in the manner at which a state institution such as the National Capital District Commission would take on a commercial domestic loan over K300 million to fund road projects in Port Moresby.
He said with the current debt situation faced by the country was not a time to incur even more.
Despite the rationale provided by the city authority to frontload its road projects and not wait for increases in costing for future projects- the Opposition Leader maintained that the loan would add to the already worsened at 43.1% according to the 2015 Mid-Year Economic and Fiscal Outlook Report presented from the Treasury Department in June by the treasurer.
“I do not think at the present that is a good idea to incur further debt on any government institution. At the moment your debt to GDP ratio as reported by the medium fiscal outlook report by Treasurer Pruaitch stand at 43.1%- in fact that debt built on whether it was international or domestic, it will continue to build on that 43.1% debt to GDP ratio.”
“So on that perspective I would think that giving huge amounts of loans via a domestic institution to a government entity I do not think that is the right approach at the present when our economy is declining, when the proceed of LNG are not found where they are supposed to be, and when the commodity prices are down,” Mr Polye said.
“You talk about NCD borrowing at a 6.5% interest rate from BSP, well I do not see NCD getting the required amount when the decline in the market will affect BSP which is owned 35% by the State.”
In other words what we see is a dry cashflow. All monies in the public sector meaning Treasury has all been spent. There is no more money left.
He added that with the cash flow in the country drying up the government is now in a limbo and is now looking into financial organizations like BSP, Nasfund, and superannuation fund.
“Mark my words that is what is going to happen- you dry up BPNG to do something that the government can’t do and they are getting loans at the guarantee of the government,” he claimed.
“NCD will not have enough money to repay that, although BSP is our bank but at the moment the timing is not right. They should be investing in more viable areas overseas to create more money to grow. If you give that money to a government that is already insolved with low cash flow now it is not the right strategy to apply in commercial terms.”
“I would not encourage other governors not to go and get loans from the bank because they do not have any sustainability to support the loan when the national government will be only source that will repay the loan.”
“I would also urge the financial institutions not to give further loans because the market has dropped.”
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