Page 19 - IB June 2020

PNG PNG

Depreciation and inflation levels

adjustment in the kina to eliminate overvaluation, inflation exchange rate and exchange rate rationing is both harmful
is expected to pick up temporarily to 6.3% between 2020 to and unnecessary.
2022.” 6% is about the annual average inflation rate for PNG The sources for the graphs are: IMF Financial Statistics, BPNG QEB
for the post-independence period (excluding the 1990s) and a statistical tables and Weiss & Kauzi (2007), Money and Banking in
level that the country can live with. PNG, BPNG and MUP.
In summary, the large depreciations and high inflation of
the 1990s should not be used to make the case against a man- editor@islandsbusiness.com
aged depreciation now. A more careful look at PNG history
leads to the conclusion that the required depreciation of the This article appeared first on Devpolicy Blog, from the
kina can be implemented, while maintaining inflation at mod- Development Policy Centre at the Australian National Univer-
erate levels. The alternative of continuing with an overvalued sity.

Business

FNPF PONDERS TELCO INVESTMENT

By Dionisia Tabureguci But with the current COVID-19 pandemic putting undue
pressure on all businesses, FNPF has had to keep a close
An invitation by Amalgamated Telecom Holdings(ATH) to watch on the dollar, which means any new investment is being
existing shareholders to buy up more shares is still being con- carefully considered.
sidered by the Fiji National Provident Fund (FNPF). “Like many businesses, cash is very important for us at this
FNPF is the major shareholder, owning around 72% of the stage - how you can sustain your cash at this stage. For us,
telecom group. "We are still assessing that investment," FNPF our contribution rate was reduced and also, there are a lot
CEO Jaoji Koroi told Islands Business. of unemployment now, so the key source of funding in terms
"It's a strategic investment for us. ATH has grown the past of cash for the next six months will be something that we’re
years into the Pacific and the rights issue is to fund that really taking an active control on. This is a priority for us
growth. Of course the environment now has changed (due to (service to members) because the demands by our members
COVID-19) so we have to assess it differently," Koroi said. are also increasing so we need to make sure that we meet
ATH is listed on the South Pacific Stock Exchange (SPX) and those requirements from our members which are critical and
announced late April an intention to raise F$126.76million paramount to us at this stage. Cash investment is still there
via a 1 share for 6.66 rights issue, at a discount price of F$2 but it’s on a cash flow basis. We’re still investing in govern-
(US$.91) per share. ment bonds for instance, but I think moving into the future,
The rights issue, which was to have closed on June 18, had the operating environment will be monitored quite strictly,”
been extended by the ATH board to July 17 “to allow all share- he said.
holders to carefully review the Offer Document and consider FNPF had around F$500million cash in its balance sheet
acceptance of the offer.” when COVID-19 forced the world into lockdown in late March.
FNPF's 72% stake translates to over 304 million shares, Since then, it has had to fork out cash by way of loans
which entitles it to around 46 million new shares. The offer to distressed companies strategically aligned to it, such as
price of F$2 per share means it will have to pay around F$92
million (US$45m) to ATH for the new shares. Continued on page 38

Islands Business, June 2020 19