Getting
p. 17 · Read in the full issue
Papua New Guinea
Getting ready for the worst
ON June 7 the Papua New Guinea Cabinet instructed four of the country’s most powerful public servants to prepare a special report.
They were; Prime Minister’s Department Secretary, Paul Bengo; Finance and Planning Secretary, Morea Vele; Person nel Management (public services) Secret ary, Web Kanawi; and Governor of the Central Bank, Sir Henry Toßobert.
Their task was to draw up contingency plans to cushion the effects of a pro longed closure of the Bougainville Cop per mine, PNG’s biggest single export earner contributing K2OO million or 20 per cent of the annual national
budget.
Unlike four previous political commit tees before it and one after it, the four men public servants’ committee had a plan out in three weeks. What it has proposed are measures that are frighten ing to say the least and will have pro found effects on the largest and richest island nation in the South Pacific. Under the proposed measures the 50,000 strong
public service will grind to a virtual standstill and the PNG economy will be partly or wholly managed by the Inter national Monetary Fund should the Bougainville Copper closure be perma nent. At time of writing the mine had been closed for six weeks. Immediately though, and based on the assumption that BCL reopens for business in Au gust, the government has decided to im plement the following policies: • Cut K 25 million off planned recur rent expenditures in the 1989 budget,
• Tighten monetary policy by having
the Bank of PNG reduce the credit lend ing target to the range of 8 percent to 10 percent in 1989, • Implement cost-cutting measures in the Public Services to significantly reduce direct and indirect cost of employment, • Defer the announcement of the de cision of the Minimum Wages Board to make sure the board fully considers the economic effects of the mine closure, and • Allow decline in foreign reserves of K2O million more than had been antici pated at the time the 1989 budget was drawn up.
Should the mine remain closed for
longer the Sengo-Vele-Kanawi-Toßobert
committee has drawn up three scenarios preparing the nation for a three-month, six-month and an indefinite closure of the mine.
In the extreme: • The public service will be cut by a quarter with the remaining three quar
ters working three-day weeks • A be declared to in validate all contracts between govern ment and other parties • All decentralised powers to be with -7 Annual cuts in government expend |evds° f * K °° m ' Mlon ° Ver reCent , I-,,, , , . r t 0 overseas sources for ba f P a ; me ™ borro '™gs through International Monetary Fund which cost *" d * evere y dimm,st ' PNGs auton y d ltS lnternatlonal reputation; • T ax the population; * Reduce access to credit and higher interest rates; more drastic reforms in the public service with a likely need to retrench many more public servants; and • Reduce current wage levels The committee has assessed that for a three-month shut-down of the mine the nation would make a net loss to foreign reserves of K3O million and a direct re venue loss of K 46 million. A six-month closure would mean a K7O million loss to foreign reserves and Kl4O million of direct revenue. For scenario three the nation would lose Kl2O million in fore ign reserves and Kl5O million in direct revenue.