IMF & World Bank get it wrong for PNG
The hard history of the storyteller

No Mr Bird, PNG is not ‘printing money’

| Academia Nomad

PORT MORESBY - Once again, the opposition is trying to mislead the people of Papua New Guinea in recent statements that PNG is printing money to fund the budget deficit.

This is just wrong. The International Monetary Fund verifies this is wrong. It is a condition of the IMF program that PNG does not print money to finance the deficit.

When we pass an IMF review, as we have just done again with the recent IMF mission, this means we have not printed money.

This is not an imposed condition from outside – it is a condition that the Marape-Rosso government believes in.

Once this claim of printing money is proven to be false, the rest of the opposition’s arguments collapse with no credibility.

Of course, the new opposition may be remembering the disastrous budget management of their old opposition friends at a time when PNG did print money – known as the ‘slack’ arrangement of 2014 to 2016.

This was a time when economic mismanagement led to a massive blowout in budget deficits – from a planned budget surplus in 2012 to a budget deficit of K3,278 million (10.4% of GDP) in 2013, K3,579 million (9.5% of GDP) in 2014, K2,785 million (7% of GDP) in 2015 and K3,087 million in 2016.

No budget repair was going on through those years. The only trick in 2017 was to revalue the size of GDP by 50% - just making their budget deficit to GDP figures look a little bit better.

These high deficits and rapidly growing debt, which was 2.5 times larger in just four years, meant the O’Neill government was struggling to finance huge deficits.

Domestic interest costs had risen to over 12% for government bonds, there was no credible budget repair program in place to attract low-cost international financing and Treasury Bond auctions kept failing.

Reports suggest the government at the time forced the Bank of PNG to start printing money, even though it was probably illegal for them to do so.

In contrast to the above desperate situation, the budget is now in a much better position.

Domestic interest costs on government bonds have dropped from 12% to 6%. There is a credible and performing 13 year budget repair plan that has reduced the debt to GDP ratio from 8.9% of GDP in 2020 (during Covid), down to 4.3% in 2023 and on track for a surplus by 2027.

Treasury Bond financing was regularly oversubscribed during 2023 despite offering lower interest rates, and we are well ahead in raisings so far in 2024.

The Marape government introduced changes to the Central Banking Act which made clear that printing money in times such as 2014 to 2016 is illegal.

Absolute limits on the size of BPNG holdings of government securities have been introduced and put into the new Central Banking Act laws. These are being monitored by the independent IMF.

The Marape-Rosso government has worked hard to fix the errors of the previous government. The performance over the last five years is so much better.

The opposition claims we should exercise fiscal restraint. We are.

We are cutting the budget deficit by a billion kina a year. PNG’s rate of budget repair is ranked in the top 10% of all countries in the world.

This is the right balance between repairing the budget and not causing unnecessary hardship to our families by cutting even harder.

The Marape-Rosso Government understands the budget problem, and has demonstrated the courage to deal with it.

* Hon Ian Ling-Stuckey CMG MP is the minister assisting PNG’s prime minister on treasury matters


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