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ANZ And Westpac In Papua New Guinea Rescue Loan Plan

ANZ And Westpac In Papua New Guinea Rescue Loan Plan
April 29
10:35 2016

The two Australian banking pillars that boast outposts in Papua New Guinea find themselves right in the middle of negotiations between the PNG government and the World Bank over a US$300 million loan needed to ease a gathering foreign exchange crisis.

The ANZ and Westpac, along with local Bank South Pacific, have accepted invitations to work with the Papua New Guinea government over lending that would just about cover half of PNG’s pent up demand for foreign exchange transactions.

The reason why the commercial banks have been included in PNG’s approach for emergency funding is that the lending would be made by the commercial arm of the World Bank, the International Finance Corporation.

And, as it turns out, while the IFC is mandated to lend to developing nations, it is unable to lend directly to sovereign borrowers.

Despite rumours to the contrary, we understand that both ANZ and Westpac were “happy to participate” in a plan that is still under construction.

PNG is rich in rumourtrage at the best of times.

But the current melding of political and financial crises has opened the sluice gates of informed speculation.

Outside of being told that the Australian banks did not support the government’s original loan plans, we have also been offered advice that Westpac has stopped writing new business in Papua New Guinea.

The freeze has been denied but advice on the lead-up to the extant negotiations with the IFC left the bank disinclined to any level of commentary on how all the parties got there.

There is, though, obvious tension between the government and the commercial banks.

The financially hard-pressed and increasingly controversial government of Prime Minister Peter O’Neill is said to be urging understandable speed.

Given foreign exchange is the life-blood of an emerging economy, the banks are said to be exercising commendable caution about an arrangement that might see each of them contribute funds to the bucket of short-term liquidity that is so desperately needed.

The plan being negotiated is said to involved contributions to the debt package by the IFC.

And each of banks that will be the conduits for the foreign exchange.

The weight of those contributions and how they might be secured remains a matter of considerable delicacy.

SOURCE: FINANCIAL REVIEW

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