“IT’S the economy stupid” became the rallying cry for Bill Clinton’s successful 1992 presidential campaign in the United States.
A growing economy represents growing national income and remains a necessary condition to improve the well-being of Papua New Guineans through expanded incomes and job creation.
The government, through its policy choices, can make a substantive difference to whether this growth is inclusive and sustainable, both economically and environmentally.
The size and nature of public investment and other government spending as well as the policy and regulatory environment can determine the pattern of growth and how the gains from economic growth are distributed amongst sectors, industries and most importantly our people.
Worldwide, the economy occupies centre stage in debates in elections. Often it plays a major role in determining the outcome of an election.
Why? Because political rhetoric and spin cannot change the reality of how people are deeply impacted by the economy.
Job losses or declines in income can severely undermine quality of life. The ability of the economy to provide employment for a growing workforce is of paramount concern in PNG and many other countries.
The PNG government, in trying to expand into all parts of the economy, cannot substitute for people’s reduced or lost income. There can be market failures but the sins and costs of government failure can be far worse.
A balance needs to be found between government’s contribution and the private sector as the engine of growth. Micro, small and medium enterprises provide the bulk of employment in many countries and in PNG this sector growing remains the best means for engaging our growing labour force.
When we examine the conduct of the Bank of PNG – the central bank - in implementing monetary and exchange rate policy, we are compelled to question its independence. Make no mistake this is a matter of serious concern.
BPNG governor Loi Bakani was reappointed last year and it is said the government recently extended his second term from five to seven years. Bakani has been the principal fiscal cheerleader for the O’Neill government, usurping at times the official fiscal spokesperson role of the Department of Treasury Secretary and even the Treasurer.
The question does arise as to the independence of the central bank and of a possible conflict in the discharge of the duties of Bakani as its governor.
Section 55 of the Central Banking Act explicitly states that BPNG shall not provide an advance to government to fund the budget deficit beyond an amount set by regulation, which I believe is around K200 million.
However, we see from BPNG statistics that it provided K1.9 billion in 2016 to prop up the government. In 2014 it provided K1.5 billion. These are excessive amounts and surely in breach of the Act.
The Bank of PNG also breached its Act in paying a dividend of K102 million in 2014. The Central Banking Act prohibits the payment of a dividend unless the assets of BPNG exceed its liabilities and paid up capital.
In 2013 the bank reported that this condition was exceeded by K447 million and in 2014 by K410 million. There are some serious questions that need to be asked of the BPNG board and its executive chairman Bakani.
I was further astonished to see the BPNG report that the government owes it K1.12 billion that has not been disclosed in the budget. The magnitude is so great that it should have been revealed to parliament and the people of Papua New Guinea.
The recent statement by the BPNG governor for people to refrain from discussing the economy in an election context invites a closer look his abject performance and for an explanation as to why, under his watch, BPNG seems to have breached its governing law.
Bakani’s former boss, sacked Treasurer Patrick Pruaitch, said Bakani’s improper statement was an assault by proxy. I view it as a twin assault on an independent institution and our democracy.