some examples of cooperation and coordination relate to maintaining a balanced budget inclusive of draw downs from trust accounts. historical experience in the 1980 ’ s and 1990 ’ s and early 2000 ’ s show that government deficits have a very immediate impact on inflation. depositing all trust accounts with the central bank, creating the sovereign wealth fund that should act as stabilization and a future generation fund will insulate large foreign currency inflows in offshore managed accounts. these should prevent those flows from impacting on the domestic liquidity, which have been a source for monetary inflation that the central bank had to defuse at a very high cost to the public purse by selling central bank bills ( cbb ’ s ). i would like to commend the government for deciding to establish a stabilization fund, future fund and infrastructure fund from the windfall revenue comprising taxes and dividends that will come from the lng project. a joint working group has been set up comprising treasury and bpng staff and will submit its recommendation on an appropriate model or framework for these funds to the national executive council ( nec ) at the end of june 2010. during the construction phase of the lng project, there is a need for government to review all development projects and budget and implement only the most immediately needed ones, to ensure that no further pressures are placed on the very limited domestic resources. the government has to be conscious not to crowd out the private sector, which will implement vey large infrastructure and development projects in the next four years, during which the lng project is constructed. in 2010, we have allowed for broad money to grow by 21 %, which we consider sufficient to meet the borrowing needs of the private sector to support economic growth. if the government will receive any windfall revenue from high mineral taxes and dividends as a result of increasing commodity export prices, it should allow the central bank to insulate them by keeping the funds in offshore foreign currency accounts, instead of depositing them in trust accounts domestically. this would reduce the impact of these funds on domestic liquidity, the exchange rate and inflation. on the second question of how the lng project will impact on the papua new guinea economy this issue has been continuously discussed in many forums, and only one or two studies have been undertaken on it. i will only touch on some of the areas of the project ’ s impact, mainly those that influence the areas the bank of papua new guinea is responsible for. papua new guinea has a history of investments in mineral and petroleum

and allow it to collect public deposits. the licensing of the wmb portrays a new approach considered by the project and bpng to be an effective means to meet the expectations of the local people. the establishment of the lae branch of wau microbank should be seen as a sign of expansion of the microfinance sector in png as more entrepreneurs from the formal and informal sectors will now be served by this microbank. the morobe province has a vibrant economy and there are prospects for the expansion of the microbank to other areas of the province. the success of this branch will show the nation that a microbank can quickly become viable also in urban areas. this province is fortunate to have the microfinance policy of the government being tested with the establishment of the pilot microbank in wau as a ‘ laboratory ’ for testing microfinance products and methodologies. the province should embrace and support the microfinance initiatives as an alternate ‘ vehicle ’ for delivery of financial services to a wider sector of the urban and rural communities. the mcc supported by the bpng are working together to assist any institution, public or private, that wish to serve the microfinance market. i commend the project team from mcc and ibbm for extending the provision of microfinance services to lae city through the establishment of the branch of wau microbank. the bank also acknowledges the continued support of the donor organisations including the adb and ausaid without which this project would not have been established. i am sure your support will be extended to the other provinces as well. i also wish to thank the morobe provincial government and administration for taking a proactive stance in this expansion plan for the wmb. thank you ladies and gentlemen.