Warning over political interference on PNG's Economy
Papua New Guinea's economic problems will hit crisis if politics gets into the way and if the exchange rate is not allowed to fall.
Professor of Economics at the Crawford School and director of the Development Policy Centre at the Australian National University, Stephen Howes, said that recently in an analysis early this week.
The analysis was first published at the East Asia Forum and in the Australian Financial Review.
“If politics gets in the way – and if the exchange rate is not allowed to fall, and expenditure is not cut – then Papua New Guinea’s economic problems will worsen,” he said.
Howes said reports of foreign exchange rationing and government cash flow problems will intensify.
“In the medium term, we could see the emergence of high interest rates and inflation, and the depletion of PNG’s foreign exchange reserves,” he said.
He added that clearly, the central bank needs to allow the exchange rate to depreciate significantly. He added that the government needs to cut spending.
“In particular, there has been incredibly rapid expenditure growth over the last few years, so finding savings should not be difficult,” Howes said.
“In sum, this year will either be a year for tough decisions in PNG, or it will be a year of descent towards crisis.
A recovery of oil prices is an unlikely way out. “Politics will tell which way the country turns.” PNG Today/ The National
Professor of Economics at the Crawford School and director of the Development Policy Centre at the Australian National University, Stephen Howes, said that recently in an analysis early this week.
The analysis was first published at the East Asia Forum and in the Australian Financial Review.
“If politics gets in the way – and if the exchange rate is not allowed to fall, and expenditure is not cut – then Papua New Guinea’s economic problems will worsen,” he said.
Howes said reports of foreign exchange rationing and government cash flow problems will intensify.
“In the medium term, we could see the emergence of high interest rates and inflation, and the depletion of PNG’s foreign exchange reserves,” he said.
He added that clearly, the central bank needs to allow the exchange rate to depreciate significantly. He added that the government needs to cut spending.
“In particular, there has been incredibly rapid expenditure growth over the last few years, so finding savings should not be difficult,” Howes said.
“In sum, this year will either be a year for tough decisions in PNG, or it will be a year of descent towards crisis.
A recovery of oil prices is an unlikely way out. “Politics will tell which way the country turns.” PNG Today/ The National
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