IN Papua New Guinea, the Government owns two main classes of public assets.
Class one assets comprise of extractive resource sector assets in minerals, petroleum and gas.
Mineral assets are held by Kumul Minerals Holding Ltd (KMHL), while petroleum and gas assets are held by Kumul Petroleum Holdings Ltd (KPHL).
Class two assets comprise of the commercial statutory enterprises, such as Air Niugini, Telikom PNG, bmobile, PNG Ports Corporation Limited and PNG Power Ltd.
These assets are held by Kumul Consolidated Holdings Ltd (KCHL).
These public assets are held in a public trust under KMHL, KPHL and KCHL, which are called the “Kumuls”.
The Government controls the management and boards of the Kumuls, and provides millions of kina worth of public funds to sustain their operations.
The majority of the Kumuls and their subsidiaries do not pay dividends to the Government because they are not commercially viable.
Many of them borrow money and pay dividends to the Government, which are fake dividends.
In recent years, PNG’s sovereign risk has escalated and the Government has found it extremely challenging to borrow money from the domestic and external sources to fund the national budget.
As a consequence, it has tended to provide no information on how the ballooning national budget deficits will be funded.
The poor performance of public assets and the inability to obtain sufficient national budget deficit funding have left the Government with no choice but to raid the Central Bank.
The Government raided the Central Bank by making amendments to the Central Banking Act 2000.
The amendments have increased the Government’s cash management funding limit from K300 million to K1.5 billion and will now be about K10 billion.
They have also removed the independence of the bank. Is it very critical that the Government introduces urgent reforms and make the Kumuls become fully independent and commercially viable? The Department of Public Enterprise should be abolished to remove political control and management of the Kumuls and their subsidiaries.
The Government urgently needs to reform the national budget and eliminate non-essential expenditures, including rationalising its departments and agencies.
The reform will ensure that spending matches its revenue collection as external assistance is now limited because of the Central Bank Act amendments.