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Papua New Guinea Treasurer Sam Basil said the half-year score card of the country’s fiscal and economy outlook shows the extent of short-term liquidity challenge facing the Government which should not be confused with decline in the economy or error in the 2019 Budget.
Basil said that the Mid Year Economic Fiscal Outlook Report (MYEFO) for 2019 has been downloaded on the Department of Treasury website (treasury.gov.pg).
“The short-term liquidity challenge has been caused by the delay in the receipt of certain key large payments including dividends, financing from multilaterals delayed due to slower actions by some departments and delays in external loan discussions in terms of Sovereign Bond and China,” he said.
He said these delays in receipts combined with an unexpectedly larger spending in December than originally planned or forecast has meant that there is less cash now than expected and there will be more at the end of the year than expected. “Normally, the Government would fill this gap with short term borrowing from the domestic market but that is not currently possible because there are limited funds available domestically and the cost is very high hence some monies have been borrowing domestically but not enough to cover the full amount of the shortfall.
“Therefore this is not a challenge brought about by a decline in the economy or even an error in the budget.” Basil said the Government is currently exploring options to both resolve the current temporary liquidity shortfalls as well as ensure that when delayed receipts do come in at the end of the year spending does not overshoot again thereby causing the same problem next year. “The Government remains committed to resolving our current short-term liquidity challenge and the administrative issues behind them,” said Basil.
“As the Prime Minister has said, we will do this without resorting to desperate measures and high cost loans. We will seek low cost alternatives that can also be used to retire more expensive domestic debt and stabilise our foreign exchange inflows.”
Basil said that despite these short-term issues it is worth keeping in mind that the fundamental outlook for the economy especially in the medium term remains strong.
“We should expect greater income from the PNG LNG as the period of accelerated depreciation comes to an end and these receipts combined with the investment flows from the Papua LNG suggest that the medium-term outlook for our country remains strong,” he said.
“This Government fully intends to use these monies to develop the local economy to the benefit of all Papua New Guineans so that in the future we become less dependent on the mineral sector and borrowing to finance our nation’s development needs,”.
SOURCE: POST COURIER/PACNEWS
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