Lupari: Future of country hinges on new parliament

Source: The National, Tuesday 08th May 2012 THE future of the country will hinge on the new parliament and government after the general election, economics and former chief secretary Isaac Lupari said in a presentation during the National Alliance party fundraising dinner last weekend. Lupari said there were greater prospects and opportunity to create a better Papua New Guinea but all those opportunities would depend squarely on a strong and disciplined leadership. He said this when making a presentation on the state of economy since 2002. He said the prospects for growth looked positive as a result of the LNG project and the Gulf LNG project, which would create a stable economy. Lupari said the LNG project “will general K100 billion over 30 years, K3.3 billion a year, starting 2014”. He said that much revenue would be parked in the Sovereign Wealth Fund overseas but the country must avoid “similar Cayman Island experiences”. He said there were big challenges ahead for the new government. He said among those tasks would be the management of the SWF. Lupari said since the collapse of fixed ex-rate regime in 1996, and adoption of the flexible regime (IMF/WB), “the kina has not gained or strengthened and it still remains volatile”. He said the value of the kina had improved against major trading currencies largely because of macro-economic stability, (instigated by fiscal stability) and intervention by BPNG, and was unlikely to further depreciate because of increased import activity (LNG) and government’s reckless spending in recent months. He said looking back to the past decade, PNG almost went into default in early 2000s from the mismanagement and reckless spending by the government under the late Bill Skate. He said debt is expected to rise from 2012 onwards because of the large borrowings by government to finance the LNG project. He said high interest rates were bad for the economy as there “will be no new investments, businesses collapses, unemployment rises, Public debts (domestic debts) rises; lesser resources in the Budget”. He said from the period 1997-2002, PNG suffered from bad economic management and uncontrolled spending. Lupari said from 2003-2009 there were signs of great improvement but that was now under threat “if current Government fails to curtain excessive spending”. He said inflation was high between 1997-2003, largely because of fiscal instability caused by budget blowouts. He said from 2003-2008, there was great improvement and inflation was brought under control by fiscal stability and discipline but inflation “is again on the rise from 2008 largely due to LNG project but significantly due to deterioration in fiscal discipline”. He said if the trend continues, “PNG will re-enter the late Skate’s and Mekere’s era”.