PNG economy shows signs of recession: academic

The country’s economy is showing signs of recession, says an academic.

 Francis Hualupmomi, a political scientist and a PhD student in Public Policy in the School of Government at the Victoria University of Wellington, New Zealand said our currency is depreciating sharply against foreign currencies.

“This holds true on the exchange rate,” Hualupmomi said.

“It appears clearly that the currency is not necessarily affected by the US dollar but by domestic macroeconomic management.

“This should be admitted rather than shifting blame on the global market forces. The argument that the economy is affected by depreciating US Dollar may not necessarily hold true. US Dollar remain stable while PNG Kina depreciating.”

 Hualupmomi added that the establishment of the country’s Sovereign Wealth Fund must be fast track so support to economy during low commodity prices on the world market.  

“As a resource dependent economy that highly depends on resource rents, such as oil revenue the government must micromanage this windfall during high price.

“This will muscle government's economic and financial power to cushion against turbulence such as oil shock or drop in oil price.

“The government should develop what I call a complex adaptive economic system that is able to read geopolitical and geo-economics signals from the environment to remain resilient in the global economy. Unless this is done we will continue to borrow and mortgage our future wealth,” Hualupmomi said.

The Bank of Papua New Guinea Monetary Policy Statement for the month of September 2016 stated that Kina continued to depreciate against major world currency because of lower revenue income into the national purse.

“PNG continued to experienced low export commodity prices during the nine months to September 2016. These resulted in low foreign exchange inflows and lower Government revenue,” Governor Loi Bakani stated in the policy statement.   

“The Kina deprecated against the US dollar (US$) from US$0.3485 at the end of September 2015 to US$0.3155 as at 20th September 2016 by 9.5 per cent due to lower currency exchange inflows  and strengthening of the US Dollar.

“The Kina rate also depreciates against the Australia Dollar (AUD) over the same period by 17.3 per cent to AU$0.4110.” 

Charles Yapumi