Act limits deficit funding

TREASURER Ian Ling-Stuckey says the Central Bank Act (CBA) changes have put a lower limit on monetary financing for budget deficits which formally had no limits.
Responding to concerns raised by former Bank of PNG (BPNG) Governor Loi Bakani on changes done to the CBA, Ling-Stuckey said the changes were done to avoid the abuses of the past and to strengthen PNG’s macro-economic credentials.
Bakani had warned against changes, saying bringing in a new limit on financing of government to include average tax revenue, loans and grants for last three years was dangerous.
He said BPNG could carry 25 per cent of this average revenue of the last three years, to amount to K10 billion.
Ling-Stuckey, however, said the formula was 25 per cent of the average of revenue over the last three years – so only one-third of this claimed level with the correct figure being K3.321 billion. “Even without allowing for inflation, the new limit is in fact lower that the funding he (Bakani) authorised in December 2016 of over K3.566 billion,” he said.
Ling-Stuckey said Bakani had been in a position to help facilitate and ensure the change was considered and as smooth as possible.
“The former governor is concerned about rushing the process. This may feel rushed for him when he refused to be involved in the process for so long,” he said.
“He was sent the proposed framework for the review back last March, after earlier announcements in Parliament, but he refused to engage.
“For the one meeting between BPNG and the IAG (independent advisory group) that it was agreed, he turned up half-way through.
“The transition arrangements were in the legislation unanimously passed by Parliament on Dec 2.
“The legislation required the changes be made as expeditiously as possible.”