The government has placed considerable importance in establishing the Sovereign Wealth Fund.
Today, Deputy Prime Minister and National Treasurer, Charles Abel, addressed the Mining & Petroleum conference, saying the Fund is a critical part of PNG’s medium term strategy in building the country’s economic resilience and saving for future generations.
The National Treasurer addressed a packed conference room, of the government’s observations on the mining and petroleum sector.
The notion to set up a Sovereign Wealth Fund stems from four key characteristics that shape how the government should think in driving the sector.
- The extractive resources are finite;
- The exploitation of the extractive resources represent a Liquidation of natural capital that is a conversion to financial assets;
- It is a volatile sector;
- It generates rents.
The Minister said that there is surplus income beyond normal profits, adding that the first two characteristics invoke considerations of equity both intergenerational and intra-generational.
He added that these attributes suggest the need to establish institutions that ensure the country does not waste wealth from natural resources.
And so to establish the Sovereign Wealth Fund, a work program for 2018 will involve the drafting and passage of various secondary legislations, the appointment of an inaugural board and establishment.
The board will guide the detailed design of operational systems and processes.
The other key institution is to design a fiscal regime to save and invest inflows from extractive resources.
“During the 2017 Supplementary Budget Government recognized that our nominal fiscal anchor – that is the headline target that guides the formulation of the National Budget needed to be augmented.
“I introduced an amendment to the PNG Fiscal Responsibility Act so it not only targets an eventual debt to G-D-P ratio of 30% but also aims to achieve a non-resource primary balance that averages zero over the medium term.”
Meantime, the extractive industry remains important to the economy with a direct contribution of 20 per cent GDP.