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Subject: Re: Price protest! by Unitech Students

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Date Posted: Sun, Sep 07 2008, 10:40:26pm
In reply to: . 's message, "Re: Price protest! by Unitech Students" on Sun, Sep 07 2008, 09:57:28pm

have not had a recent look at the economic indicators but the central bank(bank of papua new guinea) should react with monetary instruments to absord excess liquidity in the system (financial system) due to expansionary fiscal policy and increased foreign investment. central bank should use the measures to control growth in inflation as well as in interest rates.

government should take an holiday with expansionary fiscal policy and focus on the supply-side economy. more have been discussed but the impediments are still there.

an appreciation in kina against major trading currencies slightly have some impacts but it is mainly due to imported inflation on consumables but oil should be ok with napa napa company but hope the artifical fiscal stimulus package by government would have temporary cushions if implementated.

am afraid in what dimension (s) would the students and any supporters be qualified to help solve this problem. as you have mentioned, i would rather improve the investment return indicator by passing the exams with better grades.

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Date Posted: Tue, Sep 09 2008, 06:26:43am

just picked up a synopsis of an article so people can read to understand that its not just as we think it is but there are measures to combat such economic problems. [please, for further reading: www.imf.org]

Statement of an IMF Mission at the Conclusion of the Staff Visit to Papua New Guinea
Press Release No. 08/107
May 12, 2008
An International Monetary Fund (IMF) mission led by Ms. Susan Creane, Deputy Division Chief in the Asia-Pacific Department, visited Port Moresby, Papua New Guinea, during May 1-7, 2008, to discuss recent economic developments, the outlook for 2008 and the medium-term.

The mission issued the following statement in Port Moresby on May 7:

"A combination of prudent fiscal and monetary policies, and high global prices for mineral commodity exports, have underpinned Papua New Guinea's recent buoyant economic growth and macroeconomic stability. Real GDP growth, at over 6 percent in 2007, was broad-based and is expected to continue to be strong in 2008. Inflation is expected to continue to rise in 2008, albeit from a relatively low level, boosted by higher global food and petroleum prices, in addition to strong domestic demand.

"The key challenge going forward will be to continue to manage the large, but temporary, fiscal surpluses to promote higher sustainable growth and maintain low inflation. Given the strength of growth in the domestic economy, the mission is concerned that an additional loosening of fiscal policy in 2008 risks sparking additional inflation pressures. In particular, proposals to accelerate a large amount of spending in the districts this year, equivalent to over 4 percent of GDP, raises an acute risk of a sharp rise in inflation and significant waste of Papua New Guinea's resources, given the weak capacity to spend at this level. This would represent a change from the prudent fiscal policies followed in recent years and raises the potential for a return to the macroeconomic instability witnessed earlier this decade.

"In this regard, the mission welcomes efforts to improve the quality of public spending and encourages the authorities to approve the proposed Medium-Term Fiscal Strategy for 2008-12. This strategy would appropriately contain the expansion of the nonmineral fiscal deficit and smooth spending of the windfall mineral revenues over the medium term, while allowing essential spending to address development needs. The mission also notes that the current positive global and domestic economic conditions present the opportune moment to introduce reforms needed to encourage private activity in the non-extractive industries sectors of the economy. Decisive action to improve basic utilities, such as power, telecommunications services, and address weak transportation and high crime is needed for Papua New Guinea catch up with its peers with higher growth on a sustained basis.

"Regarding monetary policy, the Bank of Papua New Guinea has well managed inflationary pressures to date. The possible strong fiscal stimulus, combined with higher projected mineral inflows and still rapid credit growth, would pose a considerable challenge in trying to contain rising inflation and increase the expectation of a tightening of monetary conditions."

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