He said the Central Bank operates as an independent entity and the Government has no dealings with its roles
Sir Mekere in a statement claimed that the O’Neill Government’s political interference in the Bank of Papua New Guinea is threatening the stability of the nation’s financial system and state finances, and increasing risks for bank depositors and investors in financial institutions.
Sir Mekere said the central bank, the nation’s premier financial institution, is supposed to be the independent watchdog that supervises the system and ensures that risks are kept to a minimum.
“One of the reforms my Government introduced was to strengthen the independence and the watch-dog role of the Bank of Papua New Guinea, setting clear prudential guidelines and assigning it the additional role of supervising the superannuation industry as well as the financial intermediaries.
“The transfer of the supervisory role of superannuation funds from the Minister for Treasury to the Central Bank was the result of the near-death experience of the National Provident Fund under the Skate regime.
“But Prime Minister, Peter O’Neill is increasingly using the Bank of Papua New Guinea as a tool to prop up his Government’s shaky cash position and to defend his mismanagement of the economy and state finances,” Sir Mekere said.
“As a result, the central bank is failing in its duty to oversee the financial system effectively and transparently.
“The law gives the Bank of Papua New Guinea the authority to act independently, to protect the national economy and financial system. But it appears to have given in to political direction.
“This lessening of the central bank’s independence, integrity and capacity is yet another sign that Papua New Guinea’s important institutions of state are being compromised and weakened.
“It is yet another example of the destruction of systems and processes under the O’Neill Government to protect its own interests and make way for its cronies to benefit.
“There is hardly an institution left untouched by this Government - compromised, rendered ineffective, pillaged and looted or otherwise incapacitated.”
However, O’Neill told Loop PNG that those claims are all ‘rubbish’.
“That is absolute rubbish. Central Bank protect its independent role and they are not influenced by anybody including politics,” O’Neill said.
He told Loop PNG that the Central Bank is better managed now and then it has ever been including the time when Sir Mekere was the then Governor.
Sir Mekere said the Bank of Papua New Guinea had become a de facto money-printing machine for the government by buying unwanted Treasury Bills and Inscribed Stock and failing to monitor and control commercial bank lending to State-Owned Enterprises.
He said the Bank of PNG’s latest figures (up to December last year) show that Government domestic borrowings have hit K14.05 billion, more than double the K6.12 billion in 2012.
It is not as if the danger signs of such high levels of borrowing were not there.
They were, and the central bank chose to ignore them.