July 31, 2018

BSP asks PNG government to use bonds

 The Papua New Guinea government should consider issuing sovereigns bonds in a foreign currency to attract more international investors, says Bank South Pacific (BSP) chief executive Robin Fleming.

He told The National that that would be a less risky way for the Government to raise funds outside of domestic buyers of bonds.

“Sovereign bonds are often used to facilitate budget financing for national governments, in a currency that permits broader participation than would otherwise be available in the domestic currency, which normally is US dollar or euro,” Fleming said.

“Bonds are a common funding mechanism globally.

“In our region, Fiji has issued bonds with their most recent bond being a US$50 million (K161mil) green bond.

“Attracting international investors to a PNG debt issuance is more prospective if it is a sovereign bond in US dollars, as it follows a legal and compliance structure that international investors are familiar with.
“This offers repayments in a currency that mitigates currency risk for the investor.

“Access to international investors also reduces the risk of Government domestic borrowing capacity being challenged by a comparatively smaller number of domestic investors than would be available in the international bond markets.

“A sovereign bond also assists lengthen the Government’s debt profile. Issue of a sovereign bond would be a positive outcome for PNG.”

Fleming said commercial banks in PNG already participated in the Government’s domestic debt programme through the purchase of treasury bills, and in some instances inscribed stock. Port Moresby Chamber of Commerce and Industry president Rio Fiocco had similar views on the bond issue.

He said earlier this year that it would help Bank of PNG to intervene more in the foreign exchange market.
“PNG has a great story to tell the emerging capital markets,” Fiocco said.

“We should be looking to do the bond issue as soon as the window opens.”.....

SOURCE: THE NATIONAL/PACNEWS
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