Avoid printing more money

Letters

THE Government should focus on prudent economic management rather than lazily printing money in 2021 and increasing debt to unsustainable levels.
A negative GDP growth was forecasted for fiscal year 2020.
The forecasted positive change in GDP for 2021 is merely a reflection of GDP reverting to levels lower than beginning of 2020 (pre-Covid) therefore in essence no real GDP growth is expected within the next 18 to 24 months’ time in the absence of delayed major projects, potentially late start of Porgera in 2021 and slower global economic recovery post covid-19.
In its 2021 budget, the Government amended the rules/laws governing BPNG and its monetary policy to allow for an increase in temporary weekly OD facility available to Government from K300 million to K1.2 billion.
Is this another quasi arrangement to fund the ever increasing deficit budget in the absence of real tangible economic growth?
The Government is resorting to printing more money in the absence of a corresponding GDP growth giving rise to demand for Kina currency. This is very worrying.
So where is the demand for kina currency coming from that is creating a K1.2bil currency shortage to compel BPNG to print more money?
Printing more money in 2021 will only result in excess money supply with a consequential impact on inflation and further depreciation of kina against major trading currencies.
In the absence of other efficient and effective quantitative instruments to manage monetary policy (apart from increasing cash reserve requirements for banks or pushing out more central bank bills with yields that are not attractive).
This facility will be abused potentially contributing to ever increasing debt by way of converting the facility to treasury bonds when government cash flows is under stress.
Not good!
Who is advising the Prime Minister James Marape on this change in policy?
PNG should learn from Zimbabwe.

Anonymous Patriot