Govt urged to revoke recent amendments made to Central Bank Act

National

FORMER chief secretary Isaac Lupari is urging the Government to repeal the recent amendments made to the Central Bank Act immediately.
He said the amendments would have long term consequences on the country’s credit rating and stability of the kina.
Treasurer Ian Ling-Stuckey yesterday said Lupari’s claims were incorrect.
“A key change in the modernising reforms is that PNG has moved towards having a streamlined but strengthened board deciding monetary policy. Only three other countries still had the governor as the sole voice,” he said.
“This is not a loss of independence – it is having independence through a collegiate style rather than one person having absolute power.
“The risk in the old arrangement was that any governor could become too close to the Government of the day.
“The Independent Advisory Group (IAG) report goes through examples that suggest this may indeed have been the case.
“The IAG report discusses BPNG making illegal payments of dividends to support the former government’s excessive budget deficits from 2011 to 2015 despite the bank being technically bankrupt. This was not independence.
“Under the recent reforms, the excesses of the ‘slack arrangement’ are no longer possible because a strict, lower limit has been imposed.”
Lupari said: “Now is not the time for knee-jerk reactions.
“Our economy needs stewardship, our government needs to exercise fiscal discipline and the central bank should continue to have the independence that was originally intended.
“We’ve seen what happens in other countries where the independence of the central bank is taken away, with money being printed as if the central bank were a money printing factory.”
He referred to the example of Zimbabwe where this had taken place, resulting in the value of the local currency becoming worthless, asking if this was what we wanted to see happen in Papua New Guinea. Labelling the amendments as dangerous, he believed the Government had already eroded the power of the bank through earlier amendments made in Sept 2020, to increase the Government’s access to reserves, removing any clear boundaries of the bank’s independence.
“Rather than moving to a more ‘collegiate style of decision making’, as claimed by the Treasurer (Ian Ling- Stuckey), the amendments affect good governance and financial management,” he added.
“The government has removed key mechanisms that protect the integrity of our monetary system and independence of the bank,” he said.
Changes to the Bank Act have given way to a closer relationship between the bank and the Department of Treasury and changes to the process of appointing an independent governor of the bank.