IMF defends loan arrangements

The National Business

By NATHAN WOTI
THE loan arrangement between the International Monetary Fund (IMF) and Papua New Guinea is in the interest of the Government’s economic reform, according to an IMF official.
Country representative Sohrab Rafiq told The National that it was to the Government’s credit that it had borrowed prudently to support the economy reform policy.
“IMF financing is the sensible and prudent thing to do when undertaking necessary reforms, which is a credit to the Government,” he said.
“The alternative would have been to borrow at much more expensive interest rates from private banks and international capital markets.
“This would have posed a risk to the country’s debt.”
Rafiq said this after former prime minister Peter O’Neill stated that PNG had zero debt in 2019, but since James Marape took over, the country’s loan with IMF grew to about K4 billion.
O’Neill labelled IMF as a “payday lender camped outside your house to make sure they get paid”.
O’Neill told Marape and his minister, Ian Ling-Stuckey, who is assisting him on treasury matters that “instead of going to Washington (United States) for more loans, (they) should live within their means and help out those who are genuinely in need of support, by creating jobs, increase wages, and bring back investor confidence”.
Rafiq said the advantage of IMF support in the current arrangement included:

  • THE cost of borrowing from the IMF is concessional and very cheap (2.8 per cent against 8.4 per cent for the Eurobond issuance in 2018;
  • PROVIDES the Government with cheap and concessional financing, which gives the government room to slowly bring down the fiscal deficit without adversely impacting the economy; and,
  • BORROWING cheaply from the IMF further bolsters the Bank of PNG’s foreign exchange reserves.