A US$250 million (K772.79m)loan being negotiated between the Bank of PNG and the International Finance Corporation will provide US dollar liquidity at a time when foreign exchange inflows are low, a bank executive says.
Bank South Pacific chief executive officer Robin Fleming was commenting on Prime Minister Peter O’Neill’s statement in Parliament last week that the Government was on top of the foreign exchange shortage.
O’Neill said the IFC would provide the US$250 million to BPNG which would ration it to the three commercial banks to clear out the backlog of foreign currency demand in the country.
“What we are hearing is that the central bank is negotiating a temporary facility of US$250 million which will later be passed to the commercial banks to clear out the backlog of foreign currency demand in the country,” O’Neill said.
O’Neill said BSP has agreed to commit to it but the two other foreign-owned commercial banks had not.
He said negotiation with the two banks was ongoing and once the deal was struck with them, “the relief will be coming in soon”.
Fleming said BSP had worked with IFC on numerous transactions including a risk-sharing facility for SME businesses since IFC took up an equity holding of just under 10 per cent in 2009.
“BSP is therefore familiar with IFC and also the process and legal documentation involved to facilitate such loans,” Fleming told The National.
“The IFC facility will provide USD liquidity at a time that foreign exchange inflows are lower than in prior years with repayment of the loan being structured to align to future higher inflows of currency that will be available when foreign direct investment associated with new gas and mining projects increases.”
Meanwhile, O’Neill said the forex shortage would soon ease with the re-opening of Ok Tedi which brings in US$40 million (K125.58m) in forex and the pick-up of oil price on the international market.
Westpac could not comment when contacted. ANZ will comment later this week on the negotiations.
The National/ ONE PNG