Popoitai: Liquidity from gas project a problem

Business, Main Stories
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By SHEILA LASIBORI

THE PNG liquefied natural gas (LNG) project will continue to inject liquidity into the banking system over the construction phase.
And the presence of increased liquidity is a major concern for the Bank of PNG (BPNG) that must act to diffuse it, according to Deputy BPNG Governor Benny Popoitai.
BPNG uses the treasury bills (TB) to reduce or remove liquidity in the banking system.
Popoitai said a wealth fund was appropriate to assist in keeping the liquidity level within the banking system at a lower rate.
“Our current liquidity situation to date is that we have gone well over K700 billion in liquid assets in the banking system.
“Our exchange settlement accounts has also gone over K500 million.
“The basic indicator of the liquidity situation of the banks is that when the exchange settlement accounts of the banks with Central Bank increases, it indicates that they increased with liquidity.
“That is a situation that we have to give a serious thought in dealing with the liquidity level,” Popoitai said yesterday in Port Moresby during the international and domestic stakeholders’ workshop on the possibility of setting up a wealth fund.
“Much of that liquidity is injected from the construction of the LNG project as well as drawdown of the trust accounts from the BPNG,” he added.