Barker: Use funds well

Business, Normal
Source:

The National, Wednesday December 9th, 2015

 By GEDION TIMOTHY LAPAN

AN economist has warned that the current trend in Government borrowing must not to lead to a repetition of the economic swings and troughs of the 1990s.

Executive director of the Institute of National Affairs Paul Barker said they were the result of the Government being over-optimistic by spending well in advance earnings from resource projects.

He said despite measures being taken to rein in the debt level, it seemed to be “partly biting core public health and other operational services, which is a serious concern”. 

“Some level of debt financing or fiscal stimulus during an expected downturn was planned and sound, after the completion of the LNG construction phase and prior to proceeds from the project building up,” Barker told The National. 

He said the level of borrowing and diversion of funds away from real development priorities (core public services) into over-extravagant projects had been  excessive. 

It was found to be unduly risky in the face of lower (but not excessively low) commodity prices, he said.

“The level of public financing by domestic financial institutions is also high, and adding to their risk levels,” Barker said.

“So the Government has been seeking to borrow on the international market, under a sovereign bond, also to be able to access foreign exchange which has become tight, particularly since the tinkering with the exchange rate last year.

“However, we understand that the bond issue had to be deferred until next year at some point, owing to lack of current market enthusiasm.”

He said the current trend was a reminder to avoid the path of the 1990s by spending in advance earnings from resource project.

 

Leave a Reply