The government’s COVID-19 bond was oversubscribed after the first week, according to Treasurer Ian Ling-Stuckey. He said over K1 billion was raised and that the money will help protect Papua New Guineans from the worst effects of the coronavirus pandemic.
PNG’s Treasurer Ian Ling- Stuckey [left] and ADB President Nakao [right] in 2019. Credit: ADB
‘We asked for K1 billion this week,’ the Treasurer said. ‘We received financing of more than this amount – probably about another K85 million.
‘The reception by investors today [April 28] is a good sign for the future as we ask for another K1.5 billion in coming weeks. It is a vote of confidence in the PNG-owned and driven approach we have taken. The enormous success of the COVID-19 Bond financing will allow the core parts of the Economic Stimulus Package to proceed.
‘Employees will benefit from concessions agreed to between the Marape government and superannuation funds, allowing access to an estimated K500 million in savings.’
‘This covers extra budget financing for COVID-19. It also helps overcome urgent cash flow shortages so we can restart the 2020 Development Budget which has been stalled due to K2 billion cash flow shortages from the drop in revenues caused by the virus.’
The interest rates on the bonds ranged from 8 to 8.4 per cent for a two-year term, to 9 to 9.5 per cent for a five-year term (the weighted average rates ranged from 8.04 per cent to 9.49 per cent, depending on the term dates). The COVID-19 bonds are inscribed stock and must be held to maturity.
Line of credit
Ling-Stuckey said the COVID-19 bond issue complements K1.5 billion in support from friendly foreign governments and multi-lateral agencies. He said a line of credit for Small and Medium Enterprises (SMEs) of up to K600 million has been established following discussions with banks and other financial institutions.
‘This is in the form of negotiated loan repayment [principal and/or interest] holidays for qualifying small to medium businesses and sole traders, backed by quantitative easing from the Bank of PNG.
‘Employees will benefit from concessions agreed to between the Marape government and superannuation funds, allowing access to an estimated K500 million in savings. We expect the formal legal clearances for this support to be provided in the next few days.’
Ling-Stuckey said the measures will provide financial relief for individuals, households and businesses without damaging the Budget and at the same time sets the scene for strong recovery once the economic impacts of the pandemic ease.
Fighting a war
Ling Stuckey acknowledged that Papua New Guinea ‘had no capacity left’ to fight the ‘potentially disastrous’ health impacts of the virus, or the flow-on financial and economic effects.
He said the bond raising will enable the Marape-Steven government to help the formal and informal business sectors.
‘We all must be reasonable in understanding what is possible. This is a war, and a war means livelihoods are hurt. The government cannot cover all these hurts.’
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To the Web Administrator,
Made a few editions on my earlier post.
Could you please post this revised version and delete the earlier version
Thanks.
*********
It’s nice to hear the promotion of this “line of credit facility” for SMEs in Papua New Guinea.
To achieve the desired outcomes, it is recommended that, they be treated as a vanilla or standard and revolving line of credit facility that offers flexibility and leverage to SMEs and individuals. In that way, customers should be able to borrow and repay the drawn balance amount at any time – even to the extent of linking the approved credit facility to the beneficiaries’ main operating or investment bank accounts. The customers would require a fair/reasonable amount of “cash flow” to get this started.
Any attempts to dovetail it or mix it with “loan” languages will dilute the entire thing and will end up being counterproductive to the original intentions.
The Banking and Financial industry in the country is taking ages to design and offer genuine lines of credit facilities to individuals in the form of personal lines of credit (PLOC), home equity line of credit (HELOC), Offset Accounts and basic credit lines like “credit cards” that offers two way banking options to customers.
Loans on the other end are very restrictive and ties customers into fixed schedules with little to no flexibility to navigate around. Obviously, amortized interest rates are higher than simple interest rates that is applicable to lines of credits. No wonder, PNG has been unfairly castigated as a “debit card and loan service only” country. That has to stop somewhere.
The opportune time is now, with this newsworthy announcement of a line of credit facility by the government. Papua New Guineans’ so-called “savings” and “deposits” are locked up unfairly earning little interest incomes however, provides an easy boon for banks and other financial institutions to ply their trade – glossed over with the fractional lending privilege that their operating licenses provides.
The mere absence of these very important revolving lines of credit facilities in the financial and banking service to Papua New Guineans is a clear demonization, that reeks of a plot to lump everyone in the “repressive unidirectional” loan category. The end result is the current limited opportunities for wealth formation by ordinary citizens and small time SMEs who are considered as being unbankable and nobody in the banking world of lending. They are offered little chance to build up their credit histories with these banks and other financial institutions.
It’s nice to hear the promotion of this “line of credit facility” for SMEs in Papua New Guinea.
To achieve the desired outcomes, it is recommended that, they be treated as a vanilla or standard line of credit facility that offers flexibility and leverage to SMEs and individuals. In that way, customers should be able to borrow and repay the balance of the drawn amount at any time – even to the extent of linking the approved credit facility to the beneficiaries’ main operating or investment bank accounts.
Any idea or attempts to dovetail it or mix it with “loan” languages will dilute the entire thing and will end up being counterproductive to the original intentions.
The Banking and Financial industry in the country is taking ages to design and offer genuine lines of credit facilities to individuals in the form of personal lines of credit (PLOC), home equity line of credit (HELOC), Offset Accounts and basic credit lines like “credit cards” that offers two way banking options to customers.
Loans on the other end are very restrictive and ties potential customers into fixed schedules with little to no flexibility to navigate around. No wonder, PNG has been unfairly castigated as a “debit card and loan service only” country. That has to stop somewhere.
The opportune time is now, with this newsworthy announcement of a line of credit facility by the government. Papua New Guineans’ so-called “savings” and “deposits” are locked up unfairly earning little interests, however provides an easy boon for banks and other financial intuitions to ply their trade – glossed over by with the fractional banking bullet that their operating licenses provides.
The mere absence in the financial and banking service to Papua New Guineans is a clear demonization, that reeks of a plot to lump everyone in the “repressive unidirectional” loan category. The end result is the current limited opportunities for wealth formation by ordinary citizens and small time SMEs who are being considered as being unbankable and nobodies in the banking world of lending. They are offered little chances to build up their credit histories with these banks and other financial institutions.