Polye: PNG inflation rate stands at 3.5% - Solomon Star News

Polye: PNG inflation rate stands at 3.5%

25 February 2014

Papua New Guinea Minister for Finance and Treasury Don Polye maintains that the country’s inflation stands at 3.5 percent as of the end of last year.

Polye said that as of the fourth quarter of last year, the country’s inflation was at 3.5 percent, adding the 4.7 percent announced is still an unofficial figure.
He said the good news was that the economy is experiencing a stable and vibrant growth.
“Inflation in the country can be attributed with a lot of government money that is being rolled out into the country at the moment and the ongoing construction work that is going on with huge impact developments in the country presently among other factors as well,” Polye said.
“My tasks at present is to work closely with the Bank of Papua New Guinea and ease the pressure of the interest rates, kina stabilisation for a constant stable economy,” he said.
Polye said the Medium Term Debt Strategy 2013 -2017 (the debt strategy) had been updated, and the three existing were reaffirmed to guide the O’Neill-Dion Government’s fiscal management.
He said the first strategy is to maintain governments debt at sustainable levels.
Polye said the Government’s debt to Gross Dometic Product (GDP) ratio is expected to increase at around 35 percent in 2014 but remain consistent with the Medium Term Fiscal Strategy 2013-2017 (MFTS) and the Fiscal Responsibility Act 2006 (FRA).
“The projected increase from 33.5 percent by end of 2013 to 35.2 % at the end of 2014 is to achieve the required financing amount in order to meet governments development agenda,” he said.
The Treasurer said PNG has set itself a target of "BBB rating".
The “BBB rating” is a rating in which the rating agencies consider PNG as having adequate ability to meet its financial obligations.
“PNG’s current sovereign credit rating is B Plus with a stable outlook from Standard and Poors (S&P), which the O’Neill-Dion Government would like to improve,” Polye said.
He said the next strategy is to reduce the excessive financial risks in the debt portfolio.
This will be achieved by:

  • Maintaining foreign currency debt at around 40 percent of the total central government debt by portfolio by restricting the amount of new foreign currency loans it enters into; and
  • Reducing the amount of short term, variable rate debt (treasury bills) from the current level of about 47 percent of domestic debt to 41 percent by 2014.

Polye said that the third strategy is gradually making improvements to the domestic debt market. In order to increase the capacity and reduce the cost of borrowing domestically, the debt strategy aims to facilitate the development of the domestic debt market, he said, adding Treasury seeks to be transparent and predictable in its debt issuance through providing information publicly on debt issuance and periodically meeting investors.