Do not interfere with Bank

THE Treasurer Ian Ling-Stuckey is adamant on reviewing the Central Banking Act 2000 to modernise the law.
What he does not understand is that the Act is one of most modern laws in the world today.
The modern context of the law should be understood in terms of the policy functions and objectives under Sections 7, 8, 11, and 72 of the Act; and governance functions under Sections 15 and 55 of the Act.
The primary mandate of the Bank of Papua New Guinea (Central Bank) is to formulate and implement monetary policy for the objective of achieving price stability.
The mandate is intended to protect the value of kina, our currency, which would otherwise be diminished by run-away or hyper-inflation.
The run-away or hyper-inflation will rise when the Central Bank prints more money to finance the expansionary fiscal operations of the Government.
The printing of money fuels demand and price increase at a rapid pace.
Soon the price increases will spiral into hyper-inflation and make the kina worthless and drive our people into extreme poverty.
Our trading partners will lose their confidence in the management of our economy, and divert their trade and investment elsewhere.
Hyper-inflation has been a common feature of many economies in South America because central banks printed money to finance the fiscal operations of their governments.
Zimbabwe experienced hyper-inflation during late President Robert Mugabe’s regime, while Germany had the same problem between WWI and WWII under the reign of Adolf Hitler.
For the purpose of good governance, the central bank is not subject to any direction or control in the formulation and conduct of monetary policy, under sections 15 and 55 of the Act.
This was achieved by ensuring the central bank is not operationally part of and is independent of the government; the Government does not fund the operations of the bank; and bank does not print money to finance the national budget deficits.
Ling-Stuckey’s insistence on modernising the Act is undefined, unclear and confusing.
What remains obvious is that he wants to remove the independence of the Central Bank by amending section 55 of the Act, so that the bank can print more money to finance the expansionary budget deficits.
This is an unprecedented move which will see the nation go backwards in time for many years to come, as loss of confidence in the management of the economy by investors and businesses becomes fully entrenched.
The ultimate objective of the Treasurer’s decision to amend the Act is for the central bank to fund the 2022 election campaign and promises of the current ministers in the Government and MPs in the Opposition.
Prime Minister James Marape should take an immediate and decisive action to address the matter before more collateral damage is done to our economy.
Enough damage has already been done by Covid-19, corruption and bad decisions.

Concerned Citizen and
Economist, POM