Its time to Take PNG Forward
I disagree with the position of the IMF and World Bank in relation to the devaluation of the Kina now under way.
The IMF believes that by depreciating the Kina, this will encourage exports and make PNG production cheaper. In fact the opposite is true.
In the last 49 years, the PNG economy has not diversified much and therefore a significant depreciation is not going to automatically result in increased production and exports. We had a significant depreciation 24 years ago and that did not result in any significant increases of production in anything. It just led to more hardship for ordinary people.
This is because PNG has not invested in the productive capacity of the economy, hence it is not possible to increase production. Only the extractive sector is able to do that but almost all of them are operating at peak or declining capacity.
I just saw a 10kg bag of rice increase from K50 to K56 a bag. This is the second price increase this year. Depreciation is already hurting our ordinary people. While some low income earners are getting a tax break, the vast majority of our people in the informal sector cannot access similar assistance.
The Marape government in chasing cheap loans from IMF/WB and having resorted to printing money may have unknowingly placed a rope around the necks of ordinary citizens.
I believe a reasonable trading band of around 30 USc and 40 AUc is what we should be aiming for.
As I wrote in my previous article, we must restrain government borrowings and improve fiscal discipline. We must live within our means.
We must also redirect spending not just on economic enablers but also on the productive capacity of the various sectors. We must also look at tax incentives to encourage private sector investment to help diversify our economy.
We must decentralize our government structure as a means of encouraging spread of private sector investments. The engine room for growth is in the provinces, not in Waigani.
We must have a smaller central government that oversees provinces and doesn’t compete with them.
We need to expand private sector investment and support private sector to grow both the economy and jobs. It is not government that grows the economy, private sector does that. Too much government control, coupled with corruption is killing our economy.
The Marape Government has borrowed K32 billion in 5 years but they have only proven that government is incapable of growing the economy because economic growth has simply lagged behind government borrowing. I hope all current and future leaders learn something from this grave mistake and not repeat it in the future.
We have a situation in our country where the government thinks it should be running businesses and it fails miserably. We should focus on governing and leave business to the private sector.
It’s time for a reset. Marape has taken PNG backwards by 20 years. It’s time to take PNG forward.
Academia Nomad 