Salvage sinking kina during its 49th anniversary

By HENZY YAKHAM
TODAY, Friday, April 19, 2024, is the 49th anniversary of Papua New Guinea’s currency, the kina and toea.
Nearly five decades ago, “the last man standing”, PNG’s first Minister for Finance and current Provincial Member of New Ireland, Grand Chief, Sir Julius Chan launched the kina and toea.
There were discussions about the name of the new currency, but eventually it was agreed to settle for kina and toea.
Initially, the kina was to have the same value as the Australian dollar, which PNG was using.
Kina is the name of shell money from the coast, which people hung around their necks as something valuable. Back then, it was also highly valued and respected in many highlands areas.
The word kin is also in a language of the Western Highlands meaning “a store of wealth”.
The toea is derived from the name of a shell used mainly by people in the Papua region for bride price exchanges and other traditional ceremonies.
On April 19, 1975, the kina and toea were launched, five months before PNG attained independence on September 16 1975.
That day all government ministers, financial brains and senior officials were at the Central Bank office in downtown Port Moresby for the launching.
Just before the launching a telegram arrived and was rushed to Sir Julius – the message was that Lady Stella Chan had given birth to a baby boy.
Somehow, the Deputy Chief Minister, John Guise knew about it and said “Oh! We should call him Toea”.
Chief Minister Michael Somare, who was about to go on a live radio broadcast nationwide was also informed.
At the end of his address Sir Michael told the nation “the Minister for Finance’s wife has just given birth to a baby boy and he shall be known as Toea”.
Introducing a new currency for a newly self-governing PNG that had attained self-government status in December 1973 was a mammoth task. This was among difficult decisions the pioneer leaders had to endure in the formative years of nationhood crafting the future of what is now a sovereign independent nation.
Today, many take it for granted that PNG has own currency, but it was during a period of uncertainty when colonialism was ending with courageous men and women making big touch decisions with calculative risks.
These brave young, inexperienced, first-time politicians and not so well trained and educated, had the difficult jobs of making decisions that helped shaped and moulded PNG.
Not all the decisions were perfect, but given the rushed and short transition from colonial rule, to self-rule and eventual independence, it is by no means an easy task given many opposing and challenging factors.
The lessons and messages of 49 years ago is still very much relevant in today’s ever-evolving 21st Century PNG.
When the currency was launched, the newly self-governing PNG’s export earnings were very low.
PNG had a small budget and a handful of educated nationals tasked to steer the former Australian territories into nationhood and beyond.
Today, PNG has so much wealth with big export revenue from extractive industries, agriculture, fisheries, logging and others.
This is coupled with more well-educated citizens managing the nation’s affairs as well as occupying top managerial posts in regional and international institutions.
On books, with abundant natural and human resources, PNG should be in a transformation period with citizens enjoying high quality health, education and other State services.
But, the realities confronting PNG differs from the political grandstanding, endless rhetoric and many empty promises.
Back in April 1975, less than two years prior to the Kina Day, Sir Julius had announced that the then self-governing PNG administration had decided to introduce its own currency.
Many foreigners and indigenous people were sceptical and did not believe that as a newly self-governing PNG would make it.
PNG had only been self-governing for a short while since attaining self-government in December 1973.
The Kina Day on April 19 1975 proved the critics wrong – PNG’s own currency was launched.
It was the climax of an exercise that had involved a tremendous amount of planning and actual work.
It was also an exercise which in terms of importance and efficiency, equalled anything PNG has ever achieved.
What gave Sir Julius the greatest pleasure was the issuing the soon-to-be nation and its people their our currency.
The currency was issued on the third anniversary of the National Coalition Government of then Chief Minister, Michael Somare formed after the 1972 general election.
Looking back, the early struggling days of April 1972, it certainly was a remarkable progress.
PNG had not yet quiet reach the point of full formal political independence.
But, having own currency together with the other measures the self-governing administration took to serve control of the economic life, gave people and leaders a very substantial measure of practical independence was the thing that really matter.
Credit to founding Governor of the Bank of PNG, Sir Henry ToRobert, who was chair of the currency working group, PNG’s first Secretary for Finance, Sir Mekere Morauta and all other public and private sector officials.
They all worked tirelessly to organise the currency change-over from the Australian current, dollars and cents to PNG’s kina and toea.
Credit also to government information and liaison officers, banks, business community, the radio and print media, police, elected and village leaders and above all our people for accepting the change.
Complementing many who participated in the currency change-over Sir Julius re-iterates about “real control over our affairs”.
This control includes initiating new opportunities to protect, improve and raise the welfare of our citizens and the responsibilities that come with the changes.
In PNG’s early years, the pioneer leaders echoed the sentiments of indigenous citizens to rise and make their own choices about what they wanted and needed most and what they could do without.
The messages of pre-self-rule and independence are still very relevant and ringing louder today in 2024.
In the first few years of the infant Government of PNG the leaders were able to defer some hard decisions and choices.
This was because there was great scope for re-distribution of income and opportunities towards the people. For example, increasing taxes, particularly on companies, the Bougainville re-negotiation, rapid localisation of positions in the public sector, financing increased wages and income, more services and rapid growth in the public service employment.
This was an objective of the then Government policy and the leaders did a lot very quickly during the short change-over period from colonial rule to self-rule and eventual independence in September 1975.
The Government then was well into the time of some very difficult choices. It meant higher income or more service to some people and less for others.
“We must now be very careful with our priorities,” Sir Julius echoed the warning then – and is still very relevant today after almost 50 years.
The new currency was certainly no means to resolve the dilemma of limited resources and unlimited wants.
A newly self-governing PNG in April 1975 had fundamental choice of what strategies to adopt to protect the value of the kina – a “hard currency” or a “soft currency” strategy.
Under the alternative of “soft currency” policy, PNG would not be too worried if incomes were raised and spending programmes above the capacity of the economy to sustain when supported by realistic levels of foreign aid.
Under that policy, the then Government would run budget deficits. The Government would borrow Kina from the Bank of PNG, but as the Government and people spend this money, the Bank of PNG would run out of its reserves of foreign currency.
It would have led PNG to being bankrupt thereby reducing the value of the Kina in terms of foreign money.
That would have caused the prices of goods and services to go up.
The logic of “soft currency” approach would have led to more Government spending and higher wages, supported by more borrowing from the Central Bank.
But, with no reserves of foreign currency, the value of the Kina would fall again and that would have been a disastrous cycle.
At the end of it, there would not have any more real goods or services as a result of the extra spending, but the Government would have ruined the new currency and shattered people’s confidence.
A “hard currency” strategy meant taking deliberate action to ensure that the external value of the Kina did not weaken.
This required two things, the accumulation and maintenance of adequate international reserves to assure the credibility of such a policy and appropriate internal policies of economic independence.
On the reserves, the self-governing administration discussed with Australian Government over a fair and appropriate level for PNG’s initial reserves once PNG left the joint currency system.
The Sir Julius-led team was confident Australia would agree in wanting a strong Kina and that Australia was well aware of PNG’s need for adequate reserves to make it strong.
With adequate reserves, the flexibility permitted by having own currency was very important to allow PNG to even out its good and bad years, by running surpluses in good years and modest deficits in poor years.
This was not to allow the Government to embark on spending programmes greater than the country could earn, afford and sustain. This meant not spending what the country did not have or living beyond PNG’s means – something totally different today.
If the administration chose that road, PNG would have headed for the swamps of soft currency with disastrous results.
The “hard currency” strategy meant facing up to the difficult choices before, rather than after PNG got itself into big trouble.
Under this policy, more wages and salaries meant less ambitious Government programmes, more Government expenditure on one activity means less in others.
In the short term, this meant less in the way of incomes and services. In the long term it meant the generation within PNG of more wealth to pay for goods and services as well as revenue from development and export of natural resources to provide means to greater national self-reliance and wealth.
The central message of Sir Julius in April 1975 was of PNG being a potentially rich country and if the nation was careful and sensible, the hard choices were not quite as hard as they were in many other countries.
Since the launching of the kina and toea the people were still using the Australian dollars and cents for eight months until the dual currency period ended on Dec 31, 1975.