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'PNG sold cheaply', says Opposition

THE Opposition yesterday accused the government of blatantly ripping off PNG by selling its resources at the cheapest rate under the sovereign bond issue.

Shadow Treasurer Ian Ling-Stuckey said with the most expensive interest rate of 8.375 per cent, hard working tax payers of PNG will have to repay US$500 million (K1.5 billion) over the next 10 years. Mr Ling-Stuckey was responding to a statement from Treasurer Charles Abel announcing that the sovereign bond issue had been over-subscribed by 600 per cent. “The Treasurer Charles Abel is boasting how the sovereign bond was massively over-subscribed.

“However, the 600 per cent level of over-subscription simply says the buyers have got a bargain and the sellers, the people of PNG, have lost out.

“As a business person, if I put a property on the market and I immediately get more than six buyers at the offer price, I know for sure, I have under-priced the property.

“I would feel a fool for doing so. I would have essentially ripped myself off. In a very similar way, the people of PNG have just been ripped off with this huge loan called a sovereign bond and the Treasurer has the audacity to boast about it. Big maus long?” said Mr Ling-Stuckey.

He also accused Mr Abel of lying that part of the bond issue would be used to retire high cost short-term domestic debt. He said short-term debt, using PNG Treasury definitions, means 12 months or less and 182 day debt currently costs the government 4.73 per cent questioning how this is high cost relative to the 8.375 per cent being paid on the new bond.

“Even the most expensive short-term domestic debt is less than 8.375 per cent. Somebody needs to go back to maths class in school,” said Mr Ling-Stuckey.

He said the coupon interest rate on 10 years US government bonds is currently 2.88 per cent – nearly a full 6 per cent lower than the PNG sovereign bond.

He said both bonds are for 10 years and will be repaid in US dollars so having the same foreign exchange risk for investors. He said the difference of 6 per cent for every year for 10 years means the total risk component of the loan is US$300 million or K1 billion so 6 per cent times 10 years times US$500 million at 0.30 exchange rate.

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