Cash shortage a sign of recession

By GYNNIE KERO
IALIBU-Pangia MP Peter O’Neill says the fact that the Government is facing a cash flow crisis indicates that the “economy is in a very serious recession”. He was responding to comments by Finance Minister Sir John Pundari who said that the Government needed money to meet its obligations and pay its bills. Sir John told the media in Enga last Saturday that “the demand for money in this nation is so much that I find it very difficult to meeting the demand”. O’Neill yesterday said it was a “huge concern”. “The Government is having a cash flow crisis, which is an indication of a collapse in revenue to the state,” he said. “The collapse of the economy is compounded by the Covid-19 which is understandable. “But some of the decisions and policy changes that the government has been embarking on over the past two years has contributed enormously to the recession that we are facing today.” O’Neill warned that “the worst is yet to come”. He said current indicators of the economy included the unemployment rate with many people out of jobs, inflation going up and low business confidence. “There has been no new foreign direct investment in the country over the past two years,” O’Neill said. “Interest rates are rising in the lending by banks and the borrowings, foreign reserves declining. “All these are clear indications. And of course our gross domestic product has declined by close to 10 per cent over the past two years.
“The Government has got no new plans or policy decisions or changes that will boost the economy and promote growth. “It continued the cancellation of licences and permits for our developers and investors (in the resource sector) – a serious contributor to the lack of confidence the business community has in our Government.” He said the review being proposed on the Bank of Papua New Guinea was an unnecessary and costly exercise. “Unnecessary because that is the very same government that has been borrowing heavily and printing money at the Central Bank,” he said. “So far, the debt-to-GDP is tracking at about 60 per cent which is almost double from 2019. “There is no clear view ahead of us if this is going to be reduced.”