PNG Financial Sector Seeks Expansion and Reform
The Papua New Guinean (PNG) government is taking steps to expand its domestic government debt market and improve its financial sector. According to a recent budget report, the PNG has a “rudimentary primary market for Treasury Bills and Inscribed Stock” with weekly auctions of Treasury Bills and Central Bank Bills, but lacks a secondary market and effective repo market.
Enhancing Liquidity and Attracting Investors
The government is considering a pilot listing of some Government debts on the Port Moresby Stock Exchange (POMSoX) to increase liquidity and attract more investors. This move is expected to boost economic growth and stability in the country.
- The expansion of the domestic government debt market will provide more investment opportunities for local and foreign investors.
- Increased liquidity will help reduce interest rates, making borrowing cheaper for individuals and businesses.
Strengthening Financial Regulation
The Independent Consumer and Competition Commission (ICCC) is conducting a review of the general insurance industry in Papua New Guinea to ensure that it operates efficiently and fairly. The ICCC’s involvement in the financial sector is seen as a positive step towards fostering competition and promoting a regulatory climate that supports the growth of the financial industry.
Progress in Financial Sector Reform
The PNG government has made significant progress in reforming its financial sector since the 1990s, when major financial institutions collapsed and many people lost their savings. A series of reforms was implemented to strengthen the central bank’s role, improve fiscal policy, and restructure superannuation legislation.
Improved Central Bank Role
The central bank, now known as the Bank of Papua New Guinea (BPNG), has been given an independent role as monetary policy authority and financial regulator. This has enabled it to improve governance and performance in the PNG Banking Corporation (PNGBC) and savings and loan societies.
Enhanced Fiscal Policy
Government fiscal policy has also been improved by adopting a medium-term strategy, limiting government debt, and inserting borrowing restrictions in the Central Banking Act 2000. These measures have helped create a more stable macroeconomic environment and increased trust in the financial system.
Conclusion
The PNG government’s efforts to reform its financial sector are seen as a positive step towards promoting economic growth and stability in the country. The expansion of the domestic government debt market and the review of the general insurance industry are expected to further boost confidence in the financial sector and attract more investors.