PORT MORESBY: Leader of the Opposition, Hon. Don Pomb Polye, today urged extreme caution in managing PNG’s current economic situation. The Nation is experiencing rapid increase in import demand leading to foreign exchange outflow. This is exerting downward pressure on the kina. This situation is exacerbated by PNG’s falling commodity prices (except for cocoa) and decline in foreign exchange inflows so that PNG’s foreign reserve is sinking. The Bank of PNG’s (BPNG) has intervened to slow depletion of foreign reserves to K500 million to K600 million per month. However, the situation will worsen as the backlog of foreign exchange outflows (orders) accumulate in the banks. Therefore, the monthly economic review of a (9 to 10 month) import cover could be much less than the BPNG’s projections. The actual Gross Foreign Reserve at present is worth only between 5 to 6 months of import cover! The Opposition confidently projects that cash flow will not improve in 2016. We predict that before the mid-year the Nation will experience over K1 billion deficit. The Opposition is concerned that there is either no understanding of the actual situation or professional political negligence on the side of those in control. We believe that raising finance for meeting fixed commitments and priorities like health, education and infrastructure maintenance will be extremely difficult. The local market has lost its appetite for Treasury Bills and Inscribed Stocks. The private sector is being crowded out from finance as an unthinking O’Neill Government depends entirely on domestic finance for debt financing! The only relief our people will get is the positive impacts from lower fuel prices the world-over. PNG’s transport, manufacture, retail and consumption should give competitive and affordable prices to our people. I therefore, suggest the following to the O’Neill Government and State agents for their prompt and diligent action to position the economy: i. The Independent Consumer and Competition Commission (ICCC) to immediately start a thorough retail industry price survey, household consumer goods survey, transportation, manufacture, goods and prices survey etc to ascertain if people are benefitting from the trickling down of the global oil price decrease. The ICCC must plan to creating a win-win situation for the seller and the buyer within the context of current economic challenges; ii. The ICCC needs to upgrade their programs and introduce a new strategy to presecribe minimum (standardised) pricing for oil (fuel, gas) related trade in PNG. The ICCC should not lay back and play a “wait and see” role as the determinants for world oil prices are clear which show that the oil price will not come up beyond US$50 per barrel quickly for the medium term. That means, for instance, for the next 5 years the ICCC should stipulate what the range of fuel price should be at the bowser. iii. The Treasury, the BPNG and Internal Revenue Commission (IRC), Customs, Finance and National Planning should hold a “fiscal crisis” management meeting to revise the whole 2016 budget, the Fiscal Management Strategy and the Debt Management Strategy. The technical team needs to immediately meet with the Public Debt Committee (PDC) to realistically assess the National Debt and cash flow situation to effectively address the issues before the Nation falls over the fiscal cliff; iv. Treasury, Finance, National Planning, BPNG and other stakeholders to consider seriously meeting with the International Monetary Fund (IMF) to urgently change the Fiscal and Debt Policies of the country. A Preliminary Fiscal and Debt Management strategy be urgently devised to control the spiralling Government expenditure and rapidly depleting foreign reserves; v. I commend the work of BPNG but I urge them to give a more realistic view of the backlog of orders by the private sector. Need for importing from suppliers is important so that PNG private sector and State Owned Entities do not lose reputation with their business partners in the foreign markets. An assessment and report of how much is in foreign exchange outflows in the queue will give clear indication as to what realistic steps to effect; vi. Unfortunately the only strategy available to the Nation now is to get more loans to refinance domestic and international debt liabilities and to replenish the foreign reserve. The net effect will be very bad for PNG’s macro-economic stability but this is the only way! The obtaining of more loans is a double-edged sword but sadly the Nation is in a “catch-22” situation! The Nation is desperate to repay a K3 billion UBS loan due next month, huge domestic commercial loans from the Bank of South Pacific (BSP) and other domestic sources, huge liabilities and interest costs in the domestic market. Undisciplined expenditure and debt liabilities created by the O’Neill Government generates the present challenging economic situation. vii. I demand the Prime Minister and Cabinet to publicly debate on these economic issues! The Prime Minister must tell the Nation what is the current status on the Sovereign Bond decision of Government. Has the Government raised any funds yet? If not then when is it likely to have foreign money available to address the depleting foreign reserve and sky-rocketing debt liabilities? Or if the Sovereign Bond issue fails then what is the O’Neill Government’s next option? The Opposition also asks if the Prime Minister could avoid involving criminally implicated officers like secretaries of departments, officers of banks, officers in the Office of the Prime Minister who might tarnish PNG’s reputation in the face of the international money market. In conclusion, the economic situation of PNG today must not be underestimated because the problems created are chronic! Major events are coming up like the World FIFA games in 2017, Asia Pacific Economic Co-operative (APEC) summit in 2018, and the National Elections in 2017. Pressing life and death issues like multi-drug resistant tuberculosis (TB), HIV/AIDS, climate change induced disasters and quality health, education and infrastructure maintenance issues will need to be addressed for our citizens. The hosting and running of these programs are at stake if the economic situation is not remedied today! Therefore, I am very concerned at the complacent and careless attitude given to these real issues. The continual cover up of these pertinent issues will not solve the problems. The Opposition will continue to apply the pressure but more importantly tell our people of the truth so that we create a diligent and well informed society!
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