Borrowing confidence low: CEO

By DALE LUMA
THE country has a problem with excess liquidity with commercial banks sitting on cash because there is no appetite for borrowing, says PNG Manufacturers Council chief executive officer Chey Scovell.
Responding to questions from The National, Scovell said there was no confidence in borrowing because the risks outweighed the benefits.
He said it was also expensive to borrow in the country in comparison to other economies.
Bank South Pacific Financial Group Ltd (BSP) had signaled that it would increase its variable rate lending products from Sept 1.
This is because of the change in monetary policy by the Bank of PNG.
It increased the kina facility rate (KFR) in July 2022 by 0.25 per cent.
In response, Scovell said, “So they raised the rate in July by 0.25, and they probably did that because they were following what everybody else was doing around the world.
“This is because they are worried about inflation.
“But in saying that, in PNG, we have this huge problem with excess liquidity.
“Meaning that the banks are all siting on cash because there is no appetite for lending. People don’t have enough confidence to borrow.
“And the banks don’t have enough confidence to lend.
“Heading into this, the rest of the world in most of the other economies, if you go and borrow money, it is at less than two per cent whereas in PNG, it’s at seven per cent or more. So financing in comparison is expensive. It’s the other reason why we have this liquidity problem and it’s just hasn’t been attractive enough for people to borrow money.
“The risk outweighs the benefits.”