decline in the price of betelnut and lower imported prices of food and fuel, supported by the appreciation of the kina exchange rate. underlying inflation as indicated by the exclusion - based and trimmed mean measures were 7. 7 percent and 6. 5 percent in the december quarter of 2011, respectively. these outcomes were lower than the forecast made in the september 2011 mps, despite the strong domestic demand associated with the png lng project and high government expenditures. the bank projects annual headline inflation for 2012 to be around 8. 0 percent, while trimmed - mean and the exclusion - based inflation are projected to be around 7. 5 percent. the forecasted headline inflation is lower than the 8. 4 percent average for 2011, due to the strength of the kina, lower imported inflation, and stable international food and fuel prices. the kina is expected to remain strong through 2012, mainly due to high capital inflows and export receipts. while this has the effect of lowering inflation, it can adversely affect the traditional export sector. on the other hand, firms must be fair in the conduct of their businesses by passing the benefit of kina appreciation through lower prices to consumers. inflation in png ’ s major trading partners eased in the second half of 2011 and is expected to pass through to domestic inflation in 2012. food, in particular cereal, and fuel prices dropped in the second half of 2011, though both have increased slightly in the first few months of 2012. however, inflationary pressures still prevail, attributable to domestic demand pressures arising from the ongoing construction of the png lng project and subsequent increase in business activity in 2012, and increased private and public spending in relation to the national elections. the elections will also increase the transactions demand for money. bis central bankers ’ speeches supply - side shocks in early 2012, attributable to bad weather and subsequent damage to agricultural output and transport infrastructure are also expected to contribute to inflation. for the medium term, headline inflation is projected to be around 7. 5 percent in 2013 and 7. 0 percent in 2014. these projections are based on a number of factors including the winding - down of the construction phase of the lng project in late 2013, the continued strengthening of the kina and easing global demand ( see chart 1 ). there are upside risks to these projections, including higher domestic demand and associated inflation expectations by firms due to the png lng project, any substantial increase in food and fuel prices

loi m bakani : the benefits of electronic payments and mobile banking products welcome speech by mr loi m bakani, governor of the bank of papua new guinea, at the mobile money workshop, port moresby, 10 august 2010. * * * acknowledgements mr. tilman bruett, regional advisor, pacific financial inclusion program ( pfip ), mr micheal tarazi, senior policy advisor, consultative group to assist the poor, mr waameek noor, alliance for financial inclusion, representatives from the adb, undp and world bank, ladies and gentlemen. introduction it gives me great pleasure to host this mobile money workshop at the bank of papua new guinea. this workshop is a follow up of the workshops in vanuatu, philippines and fiji in which three bank of png representatives together with our colleagues from other pacific islands central banks attended to learn about regulatory processes and operating environments as well as benefits of electronic payments and mobile banking products. the convening of this workshop is part of the programs on “ financial inclusion ” agreed to by central banks and finance ministers in the pacific, and is also consistent with the government ’ s increased focus on extending financial services to the rural areas of papua new guinea. this program was supported by the forum economic ministers meeting in raratonga, cook islands in october 2009, which stressed that measures should be taken by respective governments to strengthen advances in financial inclusion in their respective countries to reduce poverty. before discussing the benefits of mobile phone banking in papua new guinea, i wish to outline briefly the geographical and economic setting, financial sector innovations, and the challenges in papua new guinea. geographical and economic setting papua new guinea is characterized by rugged geographical terrain with many parts of the country inaccessible by road and fragmented markets which are separated by oceans and jungles. as a consequence, the provision of government services in the rural areas is scarce, if not it is non existent, and this has led to an absence of some basis services in the rural areas. some of the government services either absent or in very poor and deteriorating conditions in the rural areas include : inadequate infrastructure ; inadequate health services ; and inadequate educational services. these core inadequacies have led to : high infant mortality, pregnancy deaths, and deaths from curable diseases such as malaria ; low literacy and high unemployment levels ; poor accessibility to markets ; and poor accessibility to banking and other financial services. whilst the government has addressed and continues to focus on the structural issues in the previous