Treasury opposes kina devaluation

By DALE LUMA
TREASURY secretary Dairi Vele says allowing the kina to “find its natural place” is better than an outright devaluation.
He was responding to a suggestion by the PNG Business Council that the kina be devalued to help exports become market competitive.
Vele said a devaluation from a policy perspective would have to consider the cost to those who would be negatively impacted and those positively impacted.
The negative impacts include inflation and a subsequent rise in the cost of living.
“Those people who will win from a devaluation will always support it and those people that will lose from a devaluation will always oppose it,” Vele said.
“Theoretically, for people who are selling, their goods are more attractive (and) they make more money.
“Our problem is that a lot of our goods are imported so selling to a foreign country is great but importing is more expensive.
“The theory is that because it (kina) is cheaper, you produce more and make more money.”
He said the kina “has a natural place” and the Government is saying (to) let it go down slowly over time so that we can see the negatives along the way”.
“And if it’s bad, too expansive or too costly to our people, than we can do something about it,” he said.
“If we go down too fast, it may have negative impacts and we can’t go back.”