Push for Modernizing Payment Systems to Boost Local Development Gets Green Light from PNG Government

Push for Modernizing Payment Systems to Boost Local Development Gets Green Light from PNG Government

Approved for Release by Hon. Ian Ling-Stuckey, CMG. MP

Minister Assisting the Prime Minister on Treasury Matters and Acting Minister for Finance

P O Parliament House

Waigani. NCD

m: +675 71111777

Prime Minister Marape has been making clear at meetings of the Budget Management Committee (BMC) and Government caucus since 2021, that we need to streamline our payment systems to the District level. Bouncing cheques have become a major constraint to local development. The specific call is that all payments to District accounts should be through Electronic Funds Transfer (EFT). For whatever reasons, these directives were never implemented on modernizing our payment systems to the sub-national level of government. This is an area of urgent reform” stated the Minister Assisting the Prime Minister on Treasury Matters and Acting Finance Minister, Ian Ling-Stuckey.

“The Marape-Rosso Government has recognized the need for reforming and streamlining procedures at the District level. The starting point is moving to EFT for all payments to Districts and Provinces, but it should not stop there. There is a need for accelerated work between Finance, Treasury, the commercial banks and BPNG to move towards all government payments being through EFT.  Almost no other government in the world continues with most payments being by cheques.Time to modernize our payment systems. Time to stop bouncing cheques by getting rid of cheques. If cheques are being stopped for commercial transactions this year, we should soon follow with the ending of Government cheques. This work will also complement other work being driven by BPNG to take a more risk management approach towards payments, including options to lift financial inclusion.

“The reality is that there are very large balances in many District Accounts through the DSIP. Indeed, balances in DSIP accounts only, totalled K531 million on 26 April (latest report available). Members are often unfairly blamed for not getting these funds out to their local communities to support SMEs, local infrastructure, and supporting local health centres and schools. However, the experience is that in many areas, the requirements for releasing funds may not be realistic”

“For example, in some areas, there is a requirement for three quotes on all goods. However, in many districts, there may be only one or two suppliers that are located anywhere near the work. The costs of getting quotes can be high. Many suppliers have also given up on doing work with the government – the processes for paying bills have become just too difficult. There is a need for competitive tendering to ensure value for money. However, we need clear procedures that also deal with the realities in many districts in sensible and accountable ways.

“In discussions with the Secretary for Finance yesterday, terms of reference are being prepared for a short review aimed at streamlining and making more effective, current local level payment systems at District Treasuries. This review will commence this week.

“The review will also recommend next steps on how to improve overall cash management by the Government. We have reached out for technical assistance from the IMF. One area of focus is to consider a sequenced move towards a Single Treasury Account. There is an estimated K7 billion in government deposits with the commercial banks. Funds are sitting in accounts, usually not earning any interest, while we are having to borrow moneys to cover such deposits. This makes no sense. There is scope to make savings of hundreds of millions of Kina by using a more modernized payment system.  Hundreds of millions of Kina that would be better used in supporting law and order, infrastructure, and our health centres and schools.

“The Marape-Rosso Government is a reformist government. We want to build on earlier improvements in public finance. We are getting cash management systems reviewed. We need strong and accountable public finance systems, if we want to attract new forms of resourcing such as carbon credits and debt for nature swaps. A streamlining review of District Treasuries will support such a modernization program. I look forward to sharing the outcomes of this review by the end of June” stated the Minister.