February 28, 2013 1 Comment
Fiji Today Blog’s story about borrowing for the new Air Pacific A330s raises the issue of how much has been taken from the FNPF and how exposed are we.
One thing is for certain – the FNPF doesn’t have a billion dollars to lend. They pick up about $300 million in new contributions. They earn about $250 million in income on investments. From this they have to make pay-outs and pay pensions. They’re not sitting on a billion dollars to lend to Air Pacific.
FNPF has for a long time lent money to the government to the point where Government securities represent over half of the assets of FNPF. There’s nothing new about borrowing by Government.
The problem is we don’t have any detail on what these Government securities are. They could be rolled over as accumulated interest owed by the state to FNPF. No-one knows anymore what the true state is of the finances of the FNPF, the Government or any of its subsidiaries, including Air Pacific.
It seems likely that Air Pacific has borrowed a couple of hundred million as a deposit that will allow the planes to provide the balance of the security. If they run into financial difficulties, they’ll have to pay the banks before they pay FNPF. In this case FNPF will show the accumulated interest and payment due but not collected as ‘earnings’. The house will grow bigger, but it will be all made of straw. It won’t fall over tomorrow but it is still a house of straw waiting for the first big wind.