Opposition predicts cash flow situation

The Opposition has confidently projected that the country’s cash flow will not improve in 2016.

They predicted that before the mid-year the nation would experience a deficit of over K1 billion. 

The Opposition is concerned that there is either no understanding of the actual situation or  the professional political negligence on the side of those in control. 

Polye believes 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,” he said.

He added that 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.”

Polye is calling on the government to take caution in managing PNG’s current economic situation.

He said 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.”

Polye added that the Bank of PNG’s (BPNG) has intervened to slow depletion of foreign reserves to K500 million to K600 million per month. 

However, he said 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!”

Author: 
Freddy Mou