Healthy financial sector key: MP

PAPUA New Guinea’s financial sector accounts for K2.3 billion of its economy in 2022, Treasurer Ian Ling-Stuckey says.
Ling-Stuckey said a healthy and modern financial sector was vital for development.
“This is a larger contribution than the size of the manufacturing sector (K1.705 billion), or even our transport and storage systems (K2.05 billion),” he said.
“We must ensure that this part of our economy works efficiently.
“It needs to serve the broader public interest as it helps mobilise savings into productive investment and support for SMEs (small to medium enterprises).”
The recently re-elected Kavieng MP said he was pleased that the second phase of a review by the Independent Advisory Group (IAG) has started.
Ling-Stuckey said the successful first phase had led to amendments of the Central Banking Act which was unanimously passed by Parliament last December.
The independent review is being led by University of PNG chancellor Robert Igara, former central Bank governor Sir Wilson Kamit and Prof Stephen Howes of the Australian National University. “International comparisons suggest there is much that can be done to improve our financial sector,” Ling-Stuckey said.
“We have some of the greatest differences in the world between interest deposit rates paid to savers and interest costs charged to borrowers.
“Fortunately, there are signs that this gap is narrowing as the Marape Government has been clear that changes are required.
“The interest rate gap decreased from 8.51 per cent in 2018 down to 6.51 per cent in 2020, the best performance since 1998.”
Ling-Stuckey said PNG’s financial sector lacked adequate competition which led to monopoly-style profit levels.
“There is a serious problem of excess liquidity in which savings are not turned into investments,” he said.
“There is a need to examine the use of technology and how it can improve access to finance and insurance for many more of our people.
“We also need to address inefficiencies in our payments system which see too many people not being able to deposit funds and too many cheques bouncing due to unnecessary and bureaucratic impositions from our financial sector.”
IAG is calling for public submissions which are due by Aug 26.
Ling-Stuckey said the importance of a comprehensive public consultation process had been built into the Terms of Reference and encouraged businesses and others to
forward their views on how
PNG’s financial system could be improved.
“This is an example of the major structural reforms underway by the Government to modernise the PNG economy and lift our economic growth rate.”