6 Feb 2007

PNG Central Bank warns government not to over spend

11:36 am on 6 February 2007

Papua New Guinea's Central Bank is concerned that heavy spending by the Government leading up to the elections could push up the exchange rate and inflation.

The Post Courier newspaper reports that the bank, in its monetary policy statement, is urging the government to prudently manage its fiscal operations in the lead-up to the elections and continue to redirect expenditure to the priority areas of health, education, law and order and physical infrastructure.

Governor Wilson Kamit says since much of the money in the last two supplementary budgets is locked away in trust accounts for future draw downs, this might increase government spending in the first six months of this year adding to an already highly cashed banking system.

He says the bank could face a tough time trying to diffuse the liquidity injections.

Mr Kamit is calling for closer co-ordination between the bank and the government to ensure that macroeconomics stability is maintained and economic growth continues.

He says in light of the national elections, it's imperative for the government to adhere to its expenditure plans, as any over-expenditure or reduced revenue would result in a higher budget deficit.