Exchange rate and macro‐economic policy in independent Papua New Guinea Ross Garnaut and Paul Baxter, in consultation with Anne Krueger Government of Papua New Guinea, Port Moresby, March 1983, 248 pp.
| Author | Brian Brogan |
| DOI | http://doi.org/10.1002/pad.4230070409 |
| Date | 01 October 1987 |
| Published date | 01 October 1987 |
Book
Reviews
405
in
all crystal balls. Subject
to
that the surveys are essential reading for
all
who need to
form their own views on future trends.
K. W.
S.
MACKENZIE
EXCHANGE RATE AND MACRO-ECONOMIC POLICY IN INDEPENDENT
PAPUA NEW GUINEA
Ross
Garnaut and Paul Baxter, in consultation with Anne Krueger
Government
of
Papua New Guinea, Port Moresby, March 1983, 248 pp.
The study is an assessment
of
post-independence macroeconomic policy in Papua New
Guinea, by an Australian academic, Dr Ross Garnaut, a former adviser to the Papua New
Guinea Government and now Australia’s ambassador to China, and Paul Baxter, a statis-
tician who prepared the definitive input-output table for Papua New Guinea. They had
the assistance of Professor Anne Krueger
of
the University of Minnesota, who dropped
out of the assignment on her appointment as Vice President, Economics and Research at
the World Bank.
The work was commissioned by the Papua New Guinea Government as a response to
a
growing critique of the country’s fundamental macroeconomic stance since Independence
in
1975. While the present reviewer broadly supports the findings of the study, its acceptance
within Papua New Guinea was somewhat diminished due
to
the fact that Dr Garnaut was
the architect, and continued strong supporter, of the policy framework which the mission
was asked to assess.
At independence Papua New Guinea, a country of about three million people, had
only
an embryonic economy. Embracing the eastern half
of
the island
of
New Guinea, a group
of major offshore islands and a collection of smaller ones, its topography is a mixture
of
rugged mountain slopes, highland valleys, fertile coastal plains and marshy flood plains.
Rich
in
gold, copper and possibly oil,
it
has a generally benign climate and considerable
agricultural potential. Negative features are poor internal communications, expensive and
inadequate infrastructure, a poorly trained labour force and a dispersed clan-based land-
ownership tradition which complicates the commercial use
of
land. Over 700 distinct
languages are spoken, several thousand clan groups are the focus
of
political loyalties and
roughly 80 per cent of the population live
in
rural areas, engaging
in
formal and semi-
formal activities.
Copper and gold mining, tropical tree crops-coffee, cocoa, copra and
oil
palm-and
timber provide the bulk of
the
export income. It is a highly dependent economy with both
imports and exports amounting to more than half GDP and government revenue coming
in
roughly equal proportions from direct taxes
on
companies and (modern sector) persons,
overseas borrowings and aid, mostly Australian. Goodman is a reliable source for detailed
economic and social statistics. (Goodman,
R.,
Lepani, C. and Morawetz, D. (1985).
The
Economy
of
Papua
New
Guinea
(A Report to the Governments
of
Papua New Guinea
and Australia, Development Studies Centre. Australian National University, Canberra.))
At Independence
in
1975 a policy package was put into place which came to be called
‘The Hard Kina (the currency unit) Strategy’. Based
on
a set
of
broad political principles
called ‘The Eight Aims’, which emphasized equity and local economic participation rather
than rapid economic growth, the strategy was a broadly based macroeconomic package
which aimed to moderate government expenditure growth, to insulate both the economy
and the rural industries from fluctuations in commodity prices, manage the money supply
and the exchange rate
so
as
to
provide monetary stability and
to
maintain foreign investor
confidence and moderate wage levels.
By and large the strategy worked well
in
the early days
of
Independence when political
unity
and a skilled public service-mainly expatriate-characterized the national adminis-
tration. Later
in
the 1970s, as commodity prices dropped, expatriates returned home and
To continue reading
Request your trial