Dollar bond issue for Papua New Guinea?


BAI logo no textThe Papua New Guinea Government is apparently exploring the option of a US dollar bond issue to help finance its deficit budget, according to several financial market sources.

Typically, US dollar bonds are used by Governments outside of the United States to raise money, with their US dollar value making them attractive to US-based investors.

International sources suggest the PNG Government has engaged Barclays, JP Morgan and BNP Paribas to assist with the possible bond issue, which could raise as much as US$500 million for Government coffers.

While he could not confirm the bond issue was going ahead, Anthony Yauieb, Deputy Secretary (Economic and Financial Policy) at PNG’s Department of Treasury told Business Advantage PNG that his Department was ‘exploring all options’ for capital raising.

As reported last week, the PNG Government is forecasting a K2.6 billion (US$1.2 billion) budget deficit for 2013. The Government lifted infrastructure expenditure by 69% to K2.6 billion in 2013.

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‘We make no apology for a deficit budget,’ PNG’s Prime Minister Peter O’Neill told delegates to the Australia–PNG Business Forum in Port Moresby this week. After 11 years of unprecedented economic growth, he said, the country could no longer take a ‘wait and see’ approach to infrastructure investment.

In spite of the Bank of PNG’s Governor’s contention that there is sufficient liquidity in local markets to fund the deficit, PNG’s going to the international markets was supported by ANZ Chief Economist Warren Hogan.

’It’s inevitable that the PNG Government will have to issue bonds,’ he told delegates of the Australia-PNG Business Forum. ‘It’s the perfect time to do it.’