Papua New Guinea monetary policy – a very slippery slope? 23 October 2014

3 Responses

  1. Banker

    Banker April 24, 2015 at 7:24 am

    interesting to note that BPNG holdings of Tbills has gone from PGK200m in Jun-14 to a whopping PGK1.5bn by end Dec-14. I wonder what it would be by now?

  2. mark

    mark October 24, 2014 at 3:17 pm

    Paul, your article correctly highlights the dangers to PNG’s long term economic growth by the
    a) reckless spending of the PNG government (running budget deficits) and
    b) BPNG resorting to unconventional monetary policy

    You are merely highlighting what the authorities already know. However, you might not be aware that given the kind of country PNG is Politically and Economically (its two principle underlying problems) most of PNGs macro-structural development agendas will never be realised.

    First, The electoral system of electing genuine legislators (leaders as they are referred to in PNG) in a functioning democracy is probably another 20 years away for PNG. When Democracy at its very core is broken and dysfunctional, it is not a democracy.

    Second, The unfavorable economic fundamentals underpinning the PNG economy. There has always been a net flow of wealth out of PNG (since the formation of the country). In order for a country to gain economic independence, wealth/capital must be reinvestment and recycled to build domestic capacity. When you have foreign dominance of the PNG economy and its wealth, the incentive is not there to reinvest (but rather repatriate offshore).

    Paul, it will do PNG a lot of good if we have more commentators who took a real serious look at these two broken systems, that are the pillars of any economically successful democracy.

    May I also add, that the economic principle/theory that you and many other economists, policy developers, and commentators prescribe for PNG has sadly been in use and is not working.

    Conventional or Unconventional monetary tools (call it whatever you will), does not work work (never has and never will) in a PNG type economy that operates outside the normal realms of national economic fundamentals.

  3. Arnold Patiken

    Arnold Patiken October 24, 2014 at 9:27 am

    Thanks Paul. Good analysis. The problem the country will face about having the inflation rate higher than the growth rate in private sector investment must be critically considered by BPNG.

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