PNG Government Makes Loan Payment Despite Ombudsman’s Order

admin's picture

Decision to enter into UBS loan under investigation by Commission

By Malum Nalu

PORT MORESBY, Papua New Guinea (The National, June 2, 2014) – The State has made its first repayment of the K3 billion [US$1.02 billion] loan despite the Ombudsman Commission’s orders to await the completion of its investigation into how it was obtained.

Acting Treasury Secretary Dairi Vele yesterday confirmed to The National that the State had made the first repayment of the A$1.239 billion loan to the UBS Investment Bank. He did not say how much was paid.

Prime Minister Peter O’Neill also warned Chief Ombudsman Rigo Lua last Thursday "not to impede the work of the executive government".

He told Lua that while the State would support the commission’s independent investigations into Government’s decisions, "those investigations must not impede its work or go against the nation’s overall interest".

The Ombudsman Commission is investigating the loan which the State needed to buy a 10.1% stake in Oil Search Ltd.

Lua could not be contacted for a comment yesterday. But he told The National last Wednesday that the commission would not be dictated to by the Government.

"Our directions are still current. We have never given any approval. We will be stupid if we allow that direction."

Vele yesterday confirmed the loan interest repayment but did not say what the ramifications for disobeying the Ombudsman Commission’s directive would be.

"The interest payments were made. The details have been passed on to the Ombudsman Commission," he said.

Asked if the payment was in defiance of the Ombudsman’s orders, Vele said: "That I can’t comment on."

All I can confirm is that based on legal advice to the State, we have met all our obligations, financial and legal, and these have been passed on to the Ombudsman."

Vele had asked Lua in a letter last month to allow the State to make the first interest payment on the K3bn loan by May 16 or lose its stake in Oil Search Ltd.

Vele had written to Lua on May 14 seeking its concurrence to pay the interest but the commission said it would have to analyse the request first.

Vele wrote to Lua again on May 15, a copy of which was obtained by The National, stressing that "time is of the essence" and sought his understanding in this regard.

He said the State would suffer serious ramifications otherwise.

"Under the UBS loan, the state is required to make periodic interest payments," Vele told Lua.

"If the State is prevented from making these payments, the State will be in default, and the UBS will have the right to commence enforcement processes without further notification to the State.

"Currently, the State is on notice that should the interest payment not reach the requisite bank account of UBS by 5pm this afternoon, May 16, 2014, the shares will automatically be sold.

"This is the effect of the collar loan – if the interest is not paid, the shares will be liquidated."

Rate this article: 
No votes yet

Add new comment