IN AN article entitled Do We Still Have Our Hands on the Wheel?, PNG’s national superannuation fund, Nasfund, has raised serious concerns about the country’s 2010 budget.
“The recent delivery of the 2010 budget leaves a lot of unanswered questions,” Nasfund wrote in its December newsletter.
“While we applaud a balanced budget, this in itself has been masked by slippage through trust accounts.
“Two years ago, we proudly talked about a surplus in trust accounts of between 3-4 billion kina … now it has been revealed that the trust accounts have fallen to K1.5 billion with lack of full accountability on how and why this money was spent.
“The implications of that expenditure are very clear - an economy that is overheating and the flow on effect of anticipated inflation of 9.5% in 2010.
“The economy needs no further stimulus, in fact remedial action is now required to ensure that public sector largess does not crowd out the development naturally occurring through the private sector.”
Nasfund said the PNG economy requires “a reality check”.
“Evidence of the current exuberance has been the extraordinary credit growth in excess of 30% over the last few years.”
Nasfund concluded that the government must freeze further expenditure from the trust accounts and that the Central Bank must “flex its independent muscle and raise interest rates.”
Nasfund also said that the exchange rate should be allowed to appreciate to 50 toea to the Australian dollar from the current 40.
“This would have a positive deflationary effect, taking some of the steam out of the 2010 expected inflation rate of 9.5%. It will also increase the real purchasing power of urban workers who are facing rising costs of imported goods and fuel.”
Nasfund said PNG is about to move into three to four years of extraordinary development and there can be no room for complacency or undisciplined expenditure.
“To do so, would undo much of the good work already achieved. We need to keep our hands firmly on the wheel.”