L Wilson Kamit: Brief review of economic developments in Papua New
Guinea
Speech by Mr L Wilson Kamit, CBE, Governor and Chairman of the Board of the Bank of
Papua New Guinea, on the occasion of the Payment of the 2006 Bank of Papua New Guinea
Dividend to the Government, Port Moresby, 9 August 2007.
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Introduction
The Minister for Treasury, Right Honourable Sir Rabbie L. Namaliu, CSM, KCMG, MP,
members of the Board, executives of the Bank of Papua New Guinea, ladies and gentlemen.
The Central Banking Act (CBA) 2000 specifies the objectives and functions of the Bank of
Papua New Guinea. Our core functions are that of formulating and implementing monetary
policy, supervising the financial system, ensuring an efficient payments system, and
promoting macroeconomic stability and economic growth in Papua New Guinea, the Central
Bank also has a special relationship with its shareholder, the Government.
In our thirty one years of independence we have had, fourteen years of stable low growth up
to 1989, ten years of very difficult times up to 1999, following the Bougainville crisis. This lost
decade was characterized by gross mismanagement of the economy that resulted in an
almost default on our foreign currency liabilities in 1994, which forced us to float the Kina our
national currency, an almost second default in 1998 to 1999, the combined effect of a very
severe drought, the Asian Financial Crisis and the world economic slowdown exacerbated by
continued gross mismanagement of the economy.
We were very fortunate that in mid 1999, a new government was formed, that undertook
some major reforms. Like minded leaders, especially our Ministers, continued with this
reform process and we look forward to working with the new Government on the reform
agenda.
It took four years to stabilize the economy, re-establish the confidence of the public, and
realising that the Constitutional Changes introduced to the political system through the
Integrity of Political Parties Act, will result in political stability. We are experiencing for the first
time a government which lasted a full term of five years.
These developments assisted by very high commodity prices of oil, copper and some of the
agricultural exports like rubber, resulted in a very stable macro-economic environment, of
fiscal surpluses, low inflation, low interest rates, an appreciating exchange rate and fast
accumulation of foreign exchange reserve. I am not going to the statistics but just as an
indication, our foreign currency reserves increased have increased from around US$300
million to US$1.85 billion today.
Economic activity as measured by GDP growth is projected by the Bank to be high at 4.5
percent this year. Sir Rabbie, in your recent presentation of the mid year economic
assessment and fiscal outlook, GDP growth is project at 5.25 percent for the year. We are
encouraged by this optimism and we all want to ensure that the great majority of the
population is benefiting from the mineral boom. To ensure this, we have to generate a 6 to 7
percent growth. I have stated this in my recently released July 31st 2007 Monetary Policy
Statement. I am sure that following the consolidation, and the stability period, we are moving
into a fast growth phase in the years ahead.
The authorities must strive to continue removing some of the impediments to investment by
improving the efficiency and reducing the very high cost structure of public utilities and basic
infrastructure services and that will enhance private sector investment and economic growth.
There is nothing like wanting to be on the winning team. Just look at the state of origin
games and see the value of competition. If privatization or corporatisation or right sizing is
such an unpalatable approach, let us not mark time. Lets get on with competition in the
telecommunication, power and public utilities industries.
Right Honourable Minister, we also take care of our stakeholders. Today marks another
occasion when the Central Bank pays its due to its shareholder, the Government, on behalf
of the people of Papua New Guinea. The due this time is the payment of our dividend to the
Government from our 2006 operating profit. We want to encourage other similar
organizations to do the same.
I would like to take the opportunity to thank the Board to which I am most privileged to be the
Chairman; the management and staff of the Central Bank for the support and commitment
they continue to display in their various roles. I also wish to thank the Auditor General and his
staff for their assistance over the years.
Honourable Minister with these few remarks, I now present to you our dividend payment for
the 2006 financial year of K33.0 million.
Thank you.