Bougainville shortfall

THE closure of the Bougainville copper mine will mean a shortfall in the country’s foreign exchange earnings of up to K5O million, the Bank of Papua New Guinea says in the June Quarterly economic bulletin just re leased. But the country should be able to maintain an open economy approach with a stable and easily convertible cur rency.

Even though there are no Bougainville earnings going into the state’s Mineral Resource Stabilisation Fund (MRSF) the bank expects that fund with an end of-year balance of K 144 million will be enough to cover budgetry needs for the 1990 and 1991 financial years.

The Bank of PNG estimates that the loss of three-and-a-half months of pro duction from Bougainville Copper Ltd, and the expected level of production for the rest of the year, will result in zero real gross domestic product growth in 1989. A firm monetary policy will be im plemented which is expected to neutral

ise any impact on interest rates and prices which the closure of the mine might have had.

Over the six months to June, the ba lance of payments deficit was Kl 3 mil lion, a significant deterioration on the corresponding period last year. It was due to a deadline in exports coinciding with a rise in imports. The coffee and cocoa industries were faced with depress ed world market prices. The cocoa fund was topped up by the government loan and would maintain payments to grow ers until the end of October. As far as the coffee fund is concerned, the rate of bounty payments will exhaust its re sources by mid-1990.

The bank said both industries de served government support, but this should be aimed at improving productiv ity and efficiency. “It is esential for the support to encourage the small farm hol der. Some estimates show that the coffee and cocoa industries are the source of cash income for 65 per cent of Papua

New Guinea’s rural population,” the bank said.

In commodities report in detail: Coffee: Coffee exports in the June quarter increased by 125 per cent to 26,100 tonnes. Exports are expected to be high for the remainder of 1989. But the price received during the June quar ter was 24 per cent lower than for the same period last year. Due to the possi ble exhaustion next year of the Coffee Stabilisation Fund, the Bank of PNG said an analysis of the cost and support struc ture of the coffee industry was called for

immediately.

Cocoa: Volume of exports was up 61 per cent, largely due to the increased production from rehabilitated cocoa plantations and favourable weather in the growing areas. Production was ex pected to increase further as more of the

newly planted, high-yielding hybrid

cocoa matured. Cocoa prices were also down 24 per cent.

Copra: Exports were down 12.6 per cent, and copra oil by 21.7 per cent, while prices went down by 18.6 and 24.5 per cent respectively. D