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That was a very informative paper. Very helpful for students and educators to consider to take appropriate measures.

What is equality in representation

Thank you for your response to the recent blog series David, also Songo, Moses, Nik for your comments. Firstly, I would recommend to each of you, and particularly David, that you read the document on which the blog series is based, The Path to Kina Convertibility: a study of the foreign exchange market of Papua New Guinea (http://inapng.com/wp-content/uploads/2021/02/The-Path-to-Kina-Convertibility-Study-of-the-Foreign-Exchange-Market-of-Papua-New-Guinea-21-February-2021.pdf). There is a thorough explanation of each of the points made in the blog series, and more, here. Briefly, the estimates for the calculation of increases in agriculture income are in section 11.6 and are based on estimates for agricultural export supply elasticities from Nakatani 2017. These estimates are based on recent data and so incorporate the current state of agriculture in PNG, and do not ignore the post-Independence decline in agriculture, as David claims. They are also consistent with other studies. Just the depreciation alone, without any supply response, confers a significant increase in income for this group. The at least USD 250 million p.a. improvement in the trade balance, and commensurate increase in forex reserves, is also based on Nakatani’s analysis. For Songo’s point about the effect of depreciation on foreign held debt, see section 11.7. On your comments about a gold standard and a return to it see section 10.4. In terms of the effects on inflation, pass-through in PNG is about 40% (perhaps a bit less at the moment) and is complete after about one year (section 11.3). Under current monetary policy arrangements, a depreciation will not cause hyperinflation, so that possibility can be ruled out. For Moses’ point about foreign investment, current conditions discourage it with difficulty for businesses in remitting profits and dividends due to queues for forex and the expectation of a large depreciation. As for the complex set of “usual” arrangements around how exchange rates are set to which Nik alludes, it is difficult to evaluate such claims without any evidence so no further comment is warranted. It should be noted that BPNG has adjusted the exchange rate over the past 6 years, with slow depreciation to offset the inflation differential with PNG’s trading partners to keep the real exchange rate constant (section 12.3). See also point 12 on p. 79 on possible reasons for reluctance to allow adjustment in the nominal exchange rate. The key points to remember are there is a structural imbalance in the forex market and that forex rationing has led to large queues for forex and import compression. This market dysfunction has hurt growth in PNG, and continues to do so, through a reduction in investment which diminishes productive capacity, also reducing current and future exports. It also reduces the availability of imported goods. With any relative price change, there are winners and losers and redistribution between them. For a depreciation, there are a large group of losers, mainly from urban areas (to avoid repetition see Paul Flanagan’s response to David’s last blog on this same topic). On the other hand, there are also a countering large group of winners (also elaborated on in the same response). There is a meaningful political economy between these two groups. As for the claim about brushing over the impact of a depreciation, I again refer the reader to the report (see section 11.2 and others). It is important to note that a 20% depreciation is like an ongoing 20% subsidy for all producers in the tradables sectors (at no cost to the government), that is, those who produce exportable and importable goods (goods which compete with imports). This provides a significant ongoing stimulus to this group and will spur growth in the non-resource sector, which is currently low (see section 11.1). In term of alternatives to a depreciation, wage restraint so that PNG’s inflation rate falls below that of its trading partners is an option but a painful and difficult one and so is not feasible. Fiscal restraint will assist with the structural imbalance in the forex market but that alone is not sufficient. A big increase in the government take is a viable alternative (see recent paper by Davies and Schroder), however given LNG tax concessions that possibility is a number of years away. Finally, a new commodities supercycle, which would improve PNG’s terms of trade, would also help.

A former Solomon islander journalism student of mine tells me from Honiara that to this day, oral communication and story-telling traditions are strong in their closely-knit communities. Could this be a catalyst for spreading fake news? The former student, now a full-time journalist, observes that conspiracy theories play into traditional fears about witchcraft as does an imported religion like Christianity. Interesting theories worth considering. The preference for traditional healing methods, in part due to poor government medical services, and the country's relatively low literacy rate, are probably not helping in this situation. Mainstream print media is urban-based, with a limited reach. These factors perhaps constitute the 'perfect storm', so to speak. The state broadcaster has a wider range/reach, with an important role to play in combating misinformation/disinformation and containing the situation before it gets out of hand.

Take back PNG, especially is synonymous to a national voice of economic freedom but has not political cohesion. Many sees it from religious perspective-even mentioned by PMJM himself. But the translation of his rethoric take back PNG still fall short to creating opportunities that will harness indigenous participation for economic freedom. The recent SME loan arrangement was Iscariotic in nature-right policy decision underpinned by wrong intention.

I agree Prof. David Lea, but strongly disagree with Prof. Martin Davies. Depreciating the kina exchange rate by 20% will only increase the cost of imported goods as it will require more kina to buy imported goods. Businesses are driven by profit-motive and if they pay a higher price for imported goods, then they will charge higher price to the consumers to make profit. The prices of basic necessities like imported rice, fuel, medicines, etc. will skyrocket because of imported price inflation. School fees for colleges and universities will also increase, leading to massive withdrawals from low-income earners, depriving them of their basic right to higher education. Generally, the cost of living will become very expensive because of a mere tweaking of monetary policy on the exchange rate. PNG is one of those countries with a very high cost of living, and devaluing the PNG Kina by 20% as proposed by Prof. Martin Davies will only worsen the socio-economic status of most ordinary Papua New Guineans, systematically pushing them into poverty and below poverty line. Hyper-inflation would be the most likely effect. Also, most of the state-owned-enterprises foreign debt and the government's foreign debt are held in US Dollars. Depreciating the kina exchange rate by 20% devaluation will require more kina to offset foreign debts. The USD value of our foreign debt will remain status quo, but the kina value will increase because of currency devaluation. Therefore, most of the SOEs will face difficulties to offset foreign debts because their revenues will be diverted toward debt-service repayments. Thus, loss-making will be inevitable. That was the case after October 1994 when the kina was floated and then devalued by 10-12% by Sir Julius Chan's government. The SOEs will not make profit but continue to make losses. A particular case is the Air Niu Gini where imported aviation fuel will cause flight fares to go up to make profits but because of price controls mechanisms, it will continue to make losses instead of profits. Government revenues from this important SOE will shrink bigtime which can contribute to our continuous fiscal deficits scenario. Given the fact that the former US President Richard Nixon has suspended the convertibility of the US Dollars into gold, there is no guarantee for price stability on the global market. On 15 August 1971, 35 US Dollars is worth an ounce of gold. After the abolishment of its convertibility into gold, now an ounce of gold is worth $1,790 US Dollars. PNG Kina is pegged to the US Dollar, and it uses the USD to measure its value. With a depreciating US Dollars overtime, the PNG Kina is also depreciating fast. On the same note, currency devaluation by 20% will remove the kina's purchasing power bigtime. Lastly, the government continuous fiscal deficits and perpetual foreign exchange shortages did not improve with the kina devaluation of 10-12% in 1994 and then by 40% kina devaluation in 1998 as argued by IMF, World Bank, and other international donors. I think it is time we should 'think out of the box' as to how we address the problem of continuous foreign exchange shortages and fiscal deficits in Papua New Guinea. And the first step is for the US to revert back to the Gold Exchange Standard to help other countries which are using the US Dollar as an anchor currency to maintain price stability. Secondly, the International Monetary Fund must not impose restrictions on its 186 member countries in regard to the setting of exchange rate arrangements, even if it means for countries to choose to peg their currencies to gold. Finally, PNG is facing a chronic shortage of foreign exchange for more than a double decade (1995-2020) and the government must innovate to new exchange rate arrangements to deal with their foreign exchange shortages and fiscal deficits.

I hope there won't be any confusion with PALMS! www.palms.org.au

Good information on women empowerment!

When dreaming about the things, our mind can confuse us. Our mind can make every thing possible. But to put in practice, it will take time. 1 Time and resource 2 Management and leadership 3 Political influence 4 Corruption 5 Policy Just for the limited time, if PM managed above 5 points, then at least he will do some changes. Otherwise there are big question marks.

Spot on Graham and not just UK and not just DFAT.

Certainly the point about buying short-term results is relevant: there can never be any 'skipping straight to Weber'. Now Raab has been sacked it will be interesting to see what may change. Probably little.

The report for me truly is unsound. I suppose there is another interest that we can not easily figure out. Using Western Template to measure hunger in PNG does not resonate. I have land which I own, I have forest which I own, I have waters which I own. Only the lazy go hungry.