The UPNG and Australian National University academics reported that the Government’s response to PNG’s urgent economic crisis was to focus on fiscal correction and now, tariff protection, which is not sufficient.
According to the 2018 PNG economic survey, a limitation to fiscal correction is that it fails to provide any stimulus to exporters and is inadequate to tackle the primary problem facing the PNG economy, namely, the shortage of foreign exchange.
“Two separate surveys of business show that foreign exchange shortages are the most important problem they face, that they have increased in severity and have displaced other longer-standing concerns around corruption, law and order and visas,” wrote researchers.
“There is no way around the need for a substantial devaluation of the currency.
“While a devaluation would reduce the demand for foreign exchange and provide a boost to the economy, for it to have a lasting impact it will need to be accompanied by a range of structural and governance reforms to reduce the cost of doing business and promote economic recovery in PNG.”