reforms are required which open new frontiers for productive investment and improve profitability. that opens up the way to a higher natural rate of interest, and generally more normal monetary and financial conditions. the title of the previous session was “ how to reform europe ”. in the same way as the whole eu, we in the small euro area countries face the need to reform our economies. monetary policy is common for the whole area. in other policy areas we must adjust accordingly, while improving incentives for sustainable growth in our countries. * 1 / 3 bis central bankers'speeches we must be realists and admit that we do not know much yet about the effectiveness of macroprudential instruments. this is no reason to neglect macro - prudential policy, however. it is just one more reason to be very vigilant with regard to what is happening in the asset markets, especially in the real estate market. the title of a recent imf seminar on rethinking macro policy is to the point : “ progress or confusion? ”. the present common macro - prudential toolbox in the euro area is quite limited but there is more diversity at the national level. i for one would prefer a simple and more unified set of macro - prudential instruments to confusing heterogeneity. in integrated banking markets, the available macro - prudential instruments should be identical or similar across countries. the practical problems are not trivial. the implementation of the instruments in practice is complicated, and especially the timing of their use is subject to a lot of uncertainty. the purpose of the macro - prudential policy should be to prevent fragilities from building up in the financial system during periods of low interest rates. in the present situation, the most important place where this might be happening is in the housing market. one thing to look at would be the risk weights on housing loans. banks using the internal modelling approach have, in some cases, been able to posit very low risk weights for their housing loan portfolio. this may be distortionary from the macro - prudential point of view : it may direct too large a share of the credit supply on the housing market, and reduce the interest of banks to new business lending. the present situation is very different in different countries, also within the euro area. in some countries and regions, we are seeing significant increases in household indebtedness. but in some other parts of europe, increases in new indebtedness are not

loi m bakani : economic overview and future developments in papua new guinea statement by mr loi m bakani, governor of the bank of papua new guinea, at the 2010 annual meetings of the international monetary fund and the world bank group, washington dc, 8 october 2010. * * * mr. chairman, colleague governors, president of the world bank group, managing director of the international monetary fund, ladies and gentlemen, it is my pleasure to address this 2010 annual board of governors meeting. on behalf of the government of papua new guinea i would like to extend our appreciation to the bank and the fund for the ongoing effort and initiatives to improve our living standards and global financial systems. we look forward to a fruitful round of discussions here in washington dc. governors and colleagues, the prospects for global growth continue to be impacted by the aftermath of the financial crisis. i reiterate the international monetary fund ’ s ( imf ) outlook on the world economy with an anticipated growth of 4½ per cent in 2010. whilst the growth is heading in the right direction we must acknowledge that growth remains sluggish by past standards. at the same time downside risks remain, due to rising concern over sovereign debt and fiscal imbalances that could trigger a repeat of the financial and economic crisis. the downside risks underscore the need for ongoing cooperation and commitments from mutual partners to develop policies and governance mechanisms to address the challenges and secure global prosperity. at the global level, we should support policies that address structural imbalances over the medium term including supportive monetary conditions, accelerating financial sector reform, and rebalancing global demand. papua new guinea, as a small open economy, was able to navigate the negative impact of the global financial crisis and grew by 5½ percent in 2009. in 2010, growth prospects remain positive as the economy enters its fourth year of economic expansion. the combination of a stable exchange rate and moderate interest rates is encouraging businesses expansion. employment is strong, foreign exchange reserve level is high and government debt is at a sustainable level. the solid performance of the papua new guinea economy reflects increased investor and consumer confidence following a period of macroeconomic and political stability. the country has also benefited from a number of important economic and structural reforms the government has undertaken in recent years to complement its macroeconomic policies and management. at the same time, competition has improved the delivery of telecommunication services throughout the country. this is one of our success stories of the past few years. services