Govt should first address debt: Barker


THE Government should first address the recent accumulation of debt before channelling money into a sovereign wealth fund, economist Paul Barker, pictured,  says.
The Organic Law on the Sovereign Wealth Fund was approved by Parliament in July last year.
The Department of Treasury and Bank of PNG are currently working on the final stage of its implementation, including the appointment of a board and the setting up- of an office to manage the operation.
“The Sovereign Wealth Fund (SWF) is a critical tool for economic management in resource-rich countries such as Papua New Guinea,” he said.
“In particularly, (it is) to help stabilise revenue and public expenditure, to help mitigate their substantial and disruptive fluctuations and to help sanitise some of the heavy inflows when prices and exports are both strong, which can cause a damaging appreciation of the currency and other so-called Dutch disease implications which undermine the wider economy. Particularly the growth of the non-extractive sectors (such as agriculture, services and manufacturing) which generate most of the employment and sustainable economic activity,” Barker told The National yesterday.
“This sanitisation is undertaken, notably, through the retention of a portion of the sector’s earnings in investment held offshore, while investment can also take the form of longer term for future returns, or a future fund, as applied in many countries.”
He said it could have been valuable to have had the SWF in place prior to the major recent peaks in commodity prices, notably from 2006 to 2008 and prior to 2015, “which provided some of the so-called windfall revenue”.
“Delays in preparation and application of the legislation caused these to be missed, and rather surprisingly the government applied major budget deficits even during those years of high commodity prices of 2012-14, so there would have been little opportunity to apply the Sovereign Wealth Fund then anyway,” Barker said.

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