of this amount more than k4 billion was deposited with the commercial banks, while the rest was deposited at the bank of papua new guinea. the budget deficits in 2008 and 2009, coupled with the fast draw downs of funds from the trust accounts, resulted in the balances declining to below k1 billion in august 2010. to those of us dealing with the sovereign wealth fund ( swf ) there was an opportunity to commence it during the recent mineral boom. establishing a swf to manage large windfall revenues from high commodity prices is talked about for some years. the decision to park the surplus revenue in trust accounts was not a good solution. i have no doubt that a swf would have managed the surpluses in a much better way. as a consequence, we now have one more bad experience of the management of excess revenue from mineral resources, on top of the mineral resources stabilization fund. the recovery in commodity prices in 2009 and 2010 might entail a further opportunity to establish the swf earlier than the production stage of the lng project in 2014. the monetary aspects of the developments in the period were very large inflows of foreign exchange as mineral and petroleum taxes. these flows increased the foreign exchange reserves from around us $ 500 million in 2005 to a historical high of above us $ 2. 8 billion in august 2010. the bank of papua new guinea paid the government kina for the tax receipts it received in foreign currency. through this process the infusion of liquidity into the financial system increased. the government instead of re - depositing the kina in trust accounts with the bank of papua new guinea, decided to deposit most of it with the commercial banks, at a very substantial cost to the government and the people of papua new guinea. to avoid the huge amount of liquidity from impacting on the exchange rate and inflation, the central bank had to defuse it by issuing central bank bills ( cbb ). the amount of cbb ’ s outstanding as of today exceeds k4 billion. in the previous years the cbb ’ s were issued at a relatively high interest rate of 6 percent to 8 percent, but this has declined in 2010 to below 3 percent, mainly due to excess liquidity in the financial system. this way the commercial banks managed to arbitrage between the government trust accounts and the cbb ’ s, and earn a relatively high income on those deposits. i am very pleased that the minister for finance and treasury the honourable mr. peter o ’

“ dutch disease ” will be avoided. the time is too short to go into a full analysis of the “ dutch disease ” phenomena. we at the central bank will do our best to ensure that the exchange rate is not pricing the traditional exports of papua new guinea uncompetitive in the international commodity markets. it is of paramount importance to commence the planning of the shift in the priorities now, to ensure that the 2011 budget reflects them. i am convinced that by proper planning and thoughtful utilization of our implementation capacities, we will avoid the overstretching of the nation ’ s productive resources and capacities. this way we will avoid unwarranted domestic price increases and the import of competing machinery, equipment and labour that, will depart the day the construction of the lng project is completed. such a scenario will result in the loss of all the knowhow that could be accumulated for the future use and benefit of the nation ’ s development. the three to four years of the construction stage of the lng project will be hard to manage. i am however confident that with close cooperation and coordination with the government specifically the departments of treasury, finance and national planning and monitoring the bank of papua new guinea can achieve the objective of price stability as i defined it. we are also pursuing vigorously some other objectives such as a modern payments systems that will provide a safer, efficient and cost - effective payment and settlement system in the future. financial inclusion of the rural majority through financial literacy, micro banking, technological innovation through the use of mobile phone banking. all of it without compromising the objective of a stable prudently managed financial system that is customer and service oriented and will withstand future shocks as it did in 2008. if the government can continue its focus on developing and improving infrastructures and basic social service in the rural areas, people can take advantage of these new financial and payments innovations to improve their livelihood and living conditions. they can also realize the benefits from the lng project and the improved macroeconomic developments in the economy. if this is sustained into the future, the objectives of the government ’ s vision 2050 can be realized. to do justice to all the roles that are placed under the bank of papua new guinea ’ s mandate, we will continue to protect the contributor ’ s savings in the long term savings schemes in the superannuation and life insurance industries. i wish to thank the organizers for inviting me to address the forum and i look forward to the day ’ s presentations. thank you.