Lelang queries implications of K6bil loan

Source: The National, Tuesday 30th October, 2012 By STARZA PAUL SHADOW minister for finance Joseph Lelang has warned the government to consider carefully the implications of the K6 billion Chinese Exim Bank loan. Lelang questioned whether the government could afford the K6 billion loan when the country’s economy was small. “The loan is good but the issue that we are asking is of affordability. Is this the right timing?” he said. Prime Minister Peter O’Neill said earlier the loan was necessary to fix the old infrastructure around the country. Lelang said opposition MPs were pointing out to the government that PNG would pay the loan in dollars and not in kina. He said this would have a negative impact and constraints on the economy as inflation would likely increase. “Increase in inflation means increase in prices of goods and services and our ordinary people will have to pay higher for these increases in goods and services,” he said. Lelang said the huge loan would also have constraints on our foreign reserves as PNG would be expected to repay the loan in dollars which would have a negative impact on the local economy. “The K6 billion loan will continue to deteriorate our foreign reserves as companies start importing materials from aboard to build the infrastructure as they are claiming the loan is for. “This is not a theory that we are arguing about as it is a real issue that the national government needs to be very conscious of.”