25 Oct 2017

Economist questions PNG central bank report

3:33 pm on 25 October 2017

An economist says last month's Monetary Policy Statement by Papua New Guinea's central bank was the worst it had produced in 10 years.

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Photo: 123RF

A director of the firm Indo-Pacific Public Policy and Economics, Paul Flanagan, says the Bank of PNG is fudging the figures on its printing of money.

He said the money was going primarily to fund the government's deficit while the private sector is being starved of funds.

Mr Flanagan said private sector credit was now climbing more slowly than inflation.

"This means that small businesses don't have as much money to invest. It means if you are trying to borrow money for a housing loan it is now much much more difficult. And we find the levels of this private sector credit growth, which is getting squeezed out because the central Bank is giving the money to the government instead, is crippling growth in PNG.

"PNG now has the worst growth prospects in the East Asia Pacific region."

Mr Flanagan called the Bank's latest policy statement its worst ever and he said it used misleading figures on printing money and access to foreign exchange in PNG.

He said the Bank was stifling growth and that while had a proud history and is staffed by very intelligent people, and he could not understand why its statement was so bad.

"My fear is that there is some influence there in the central Bank now. My fear is that it's not as independent as it used to be. We know there are key people who have very close links to the Prime Minister's Office who are providing advice. And my concern is that that's now bad advice and that's undermining the proud history of the central Bank - knowing what to do to keep the PNG economy growing and thriving. And it's not doing that at the moment."

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