PNG needs to depreciate exchange rate, academic says


Papua New Guinea’s economy showed signs of recovery last year but it has not been sustained this year, according to survey results presented at the 2019 Update PNG Forum in Port Moresby last week.
Australian National University director of development policy centre Stephen Howes told the forum PNG needed to depreciate its exchange rate.
Howes said PNG was the 10th most resource-intensive economy in the world, reliant on petroleum, oil, gas, coal and minerals, the Saudi Arabia of the Pacific.
“In order to recover after the boom, PNG needs to depreciate its exchange rate.
“Until it does that, PNG is going to suffer from foreign exchange shortages and that will drag on growth.
“The rising salary bill, rising interest burden and revenue is flat which makes fiscal adjustments and management difficult.
“The Government cannot pay bills because it has to pay salaries and interest obligations. State-owned entities debt and some of the guarantees were adding to the fiscal stress.”
Howes said a new fiscal strategy was needed and much more attention should be given to controlling the salary bill and other non-essential expenditure.
“There are not enough jobs in the formal sector, only about 15 per cent, and to get more people into small to medium enterprise and agriculture sector are not measured.
“The new Sovereign Wealth Funding needs to be moved from legislation to actually setting it up.”