Remarks by Governor Elizabeth Genia at the High-Level Pacific Islands Conference “Charting the Course Towards Shared Prosperity and Celebrating PFTAC’s 30th Anniversary”
| Governor’s Remarks at the High-Level Pacific Islands Conference
“Charting the Course Towards Shared Prosperity and Celebrating PFTAC’s 30th Anniversary” |
Tuesday February 27, 2024
Remarks at the High-Level Pacific Islands Conference
SESSION 6: GROWING IMF’S ENGAGEMENT WITH THE PACIFIC ISLAND COUNTRIES
Nadi, Fiji, February, 2024
By Elizabeth Genia, Governor, Bank of Papua New Guinea
Deputy Prime Minister and Minister for Finance, Hon Professor Prasad, Deputy Managing Director of the IMF, Bo Li, Finance Ministers and Central Bank Governors of the Region, Invited Guests, Development Partners and Donors, Ladies and Gentlemen.
1. I would like to first of all extend my deepest thanks and gratitude to the people of Fiji for your very warm hospitality in hosting us here in Nadi. Fiji is the beating heart of the Pacific and we have seen that over the last two days with the great welcome we have received here. From all of us – Thank You.
2. Secondly, I want to extend a very “Happy 30th Anniversary” to the IMF PFTAC Team and commend you on 30 years of invaluable service to the Pacific. Papua New Guinea; in particular, the Department of Treasury and the Bank of Papua New Guinea, have greatly benefitted from the extensive training and technical assistance programs offered through the PFTAC office.
One of the many contributions from PFTAC has been the development of the Banks financial programming tool which has been used on several occasions as a training example across the Pacific.
3. Also, as many of you know, in PNG we are a month away from marking our own one-year anniversary on entering into our IMF program and I would like to make mention in your presence, Bo Li, of the great assistance PNG has received from your staff.
I would like to thank Rob Nicholl, Executive Director for Papua New Guinea, PNG Mission Chief, Tahsin Sedik, Fabian and the Team, and very importantly, Rafiq Sohrab, who heads up the new IMF representative office in Port Moresby for your invaluable assistance and unwavering commitment to the success of the program. Also, to mention Rhoda Karl of course who has been immensely helpful to the Team in PNG.
4. Let me begin my contribution to this afternoon’s discussion by referencing the IMF’s World Economic Outlook, released earlier this year and pointing to a turnaround; albeit a slow one, in global growth spurred by a resilient US economy and increased fiscal support within China.
We are also cautiously optimistic about 2024, as global inflation is finally showing signs of easing following the sharp rate rises and other policy measures taken by most Central Banks during the pandemic and in response to Russia’s invasion of Ukraine.
5. Whilst we are optimistic, we also acknowledge the evolving risks and challenges facing the global economy, especially in the presence of rising geo-political tensions and the possibility of further supply chain disruptions from the recent attacks in the Red Sea.
Whilst other regions may be more resilient in managing these crises, our Pacific Island economies are still recovering from the residual impact of Covid 19, with some of us faring better than others.
6. Papua New Guinea entered into a 38-month program with the IMF in March 2023. We are fully committed to the program and the government is moving forward with continued progress on budget repair, with an emphasis on improving domestic revenue collection and a thorough review of the effectiveness and quality of public expenditure.
7. The government is also working to improve its overall governance framework, through strengthening ICAC, the Independent Commission Against Corruption. We are also refining our AML/CTF framework to ensure both technical compliance with AML requirements, and also effective enforcement of our AML legislation.
8. For the Central Bank, along with advising the Government on overall debt sustainability, we are continuing to work towards improving the effectiveness of our monetary policy framework and addressing the foreign currency shortages through FX market reforms. (also addressing the relative overvaluation of the Kina)
9. We have some way to go but there has already been significant progress in absorbing the excess of liquidity – i.e. the excess of deposits in our banking system – to assist with the effective transmission of monetary policy. With our exchange rate, to deal with the FX shortages, the Kina is steadily adjusting, in a gradual and in a measured way, mindful as we are of the impact of the lower exchange rate on imported inflation. (and the Kina value it places on our imports – has on imported inflation)
10. We achieved a lot in the first year of the program and a strong performance was indicated in our first review by the IMF Board in November of last year. PNG met its indicative targets, our quantitative performance criteria and all our structural benchmarks.
The passing of the first review was a significant milestone. Indeed, the IMF country team informed us that more than half of countries do not get past the first program review.
11. The next twelve months, however, will be challenging for us. The recent unrest on January 10th and 11th, primarily in Port Moresby and in Lae, had a profound impact on our society with questions as to who we are as a nation? and why this happened?
The economic impact will be significant, not only on the businesses directly affected and the security of the employment they offer, the events also impact on our standing internationally.
12. PNG will recover. We are working closely with the businesses involved to secure timely access to foreign currency to ensure our supermarket shelves are re-stocked and Government is actively engaged in implementing an assistance program to help the businesses impacted to start to rebuild.
13. Faced, as we all are, with extensive socio-economic and political challenges, the pursuit of macroeconomic stability is a shared objective for all of us attending today. As I’ve highlighted, with the example of the unrest we experienced in January, macroeconomic stability is vulnerable, and susceptible, to shocks, be they domestic or external and not the least of which is Climate Change.
14. We have spoken a lot about this subject over these two days and without overstating it, Climate Change is humanity’s greatest challenge, it poses an unprecedented threat to the planet, and to all life on it. The use of fossil fuels as a form of energy, has triggered a chain of more frequent, and more severe weather events than we have seen before in recorded history.
15. The issue is not only confined to its immediate impacts, but also to the potential to set us on a path that may be irreversible. In a short 20 years, we have already moved from the point where we are no longer being told what will happen if no action is taken, to the point where we are now witnessing those events taking place.
16. In recognition of the growing importance of tackling Climate Change, Papua New Guinea launched its Inclusive Green Finance Policy in June of 2023. In July of last year, we signed a Letter of Intent with the French Development Agency (the AFD) and the Global Green Institute for a refinancing facility to support loans issued by PNG’s commercial banks identified as having low carbon emissions.
17. Our next step is to launch an Inclusive Green Finance Centre within our Centre for Excellence in Financial Inclusion (CEFI) to assist with developing green lending products and to promote Inclusive Green Financing through its early, and adaptive stages.
18. What became very evident in drafting the Policy however was, what was intended to be a collaborative effort with other Government agencies, the commercial banks and private enterprise – ended up being a protracted awareness raising program for all involved on what an Inclusive Green Finance (IGF) Policy actually is, why it is needed and what its goals are.
19. As a result, a lot of the technical output we had hoped for fell short of what was needed, but it was, and still is, a very important first step for us. With the right technical input, subsequent updates to the IGF Policy will better reflect the evolving structure of PNG’s economy and what green and inclusive finance will mean within it.
20. Our experience with our IGF Policy allows me to touch on one of the questions that may lead the discussion that follows in this session, and that is “how can the IMF engage with, and support us more effectively?
21. An answer to that question could simply be guidance. Guidance on us taking a unified approach, from all the Pacific Island Nations, on how as a group, we can come together to combat the effect of Climate Change.
22. With countries concerned about taking on more debt, long term goals such as tackling Climate Change requires long term funding. We would like to hear more about how we can build a robust policy framework for government, the private sector and the community, and one that guides us towards initiatives that will work.
23. We would like to know more about Resilience and Sustainability Financing (RSF) and how it is funded through the RST – the Resilience and Sustainability Trust. The financing part looks to be quite innovative with funding being made available from SDR allocations from more developed economies and channelled to those of us who are more vulnerable to the immediate impacts of Climate Change – we need an approach that combines financing, with guidance on policy frameworks, and practical action.
Another query would be, what does RSF funding look like? As I mentioned long term goals such as tackling Climate Change needs long term funding. Also since Papua New Guinea is uniquely part of the Pacific ASEAN, what examples from ASEAN can the IMF share? The ASEAN region has moved rapidly toward adopting climate risks into their policy frameworks.
24. And this leads me to possibly a second question in the discussion that follows on the appropriateness of capacity development initiatives.
25. We have been very fortunate here in the Pacific with the accessibility we have to PFTAC’s programs on building institutional capacity and the design of sound macroeconomic policies with some very good initiatives, like C-PIMA (or Climate PIMA) – the five pillars of Climate – Public Investment Management Assessment – a key component for any climate-aware infrastructure development.
26. If we could have advice at both the macro-level (on project financing for example) and also at the more detailed micro-level on specific initiatives, it would be of great benefit and would help us in building resilience and in looking towards long term projects with sustainable economic benefits on the one hand, and long term carbon emission reduction outcomes on the other.
27. In closing, I would like to emphasise our shared responsibility on Climate Change:
28. Climate change has a direct impact on our economic wellbeing – yet it poses more than just a major threat to our long-term growth and prosperity – it is an existential threat to humanity. We have a shared responsibility globally, and regionally, to improve the resilience of our Pacific economies and to work towards sustainable solutions to protect our communities and our fragile ecosystems from its detrimental impacts.
Thank You