Imf/Png

Business

talks at another standstill

THE International

Monetary Fund (IMF) will only resume talks with Papua New Guinea if there is a satisfactory performance by the government under a staff mon itored program (SMP).

The SMP would have to run for at least six months before a possible stand-by arrangement (SBA) is dis cussed.

The IMF says the government would also have to provide evidence that it is committed to adopting an adjustment program worthy of moni toring by the staff.

This would include: • * parliamentary approval of a revised budget for 1999; * announce a credible plan to bring the Bank of Papua New Guinea credit to government to within the current legal limit and eliminate government arrears by the end of 1999; and * improve cooperation with the IMF staff, including provision of up to-date economic and financial statis tics and of all requested information relating to the finances of the govern ment; public enterprises and the Bank of Papua New Guinea.

These conditions are in the final report of the International Monetary Fund released recently after its talks with the PNG government in January this year.

The report also expressed grave

concern about the recent course of financial poli cies taken by the government. It warned that if this course con tinues, it will lead to a full

fledged fiscal

crisis, with very

damaging effects

for the economy.

The discussions during this year’s consultation were very unsat isfactory due to unavailable vital information from the PNG govern

ment. The IMF mission was unable to get update estimates on the national accounts; Bank of PNG’s balance sheet and the 1998 fiscal perfor mance.

The IMF mission was also unable to get an update on official macroeco nomic projections for 1999. The unavailability of staff from the Department of Personnel Management made it difficult to assess the outlook for the 1999 budget.

The report said the government was aware in November 1998 of the impending visit of the IMF thus, the lack of adequate information indicat ed that the PNG government was reluctant to release sensitive data.

During the first visit by IMF offi cials to PNG last June, they proposed a package of policies to help the economy recover from outside shocks.

The mission emphasised the need for action to avert an easing of the fiscal stance during the second half of 1998.

Contrary to these recommenda tions, the IMF mission reported that the fiscal policy expanded sharply in the last quarter of 1998, while gover nance took a turn for the worse.

The follow-up discussions in Washington in October 1998 ended without any agreement.

This year’s consultation provided the IMF mission with an opportunity

to take stock of recent developments.

It also enabled them to review the

policy challenges for the period ahead

and reassess prospects for PNG’s relationship with the Fund.

In the 1999 Article IV Consultation with PNG, the IMF outlined its advice.

It said had advised the government to take action to avoid the easing of the fiscal stance during the second half of 1998.

Government was also advised to complement this by addressing the weaKnesses in economic governance.

These include: * restoring investor confidence by adopting policies conducive to a sta ble and friendly business environ ment; * introduce macroeconomic poli cies aimed at reducing inflation to a low single digit range, and * replenish the stock of reserves to at least $3OO million.

The IMF report stressed that deci sive action to contain the worsening fiscal imbalance will be the key to achieving these objectives. PNG is looking at its options. (The Independent) ■