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PORT MORESBY, Papua New Guinea (Nov. 7, 2002 - Post-Courier/PINA Nius Online)---The Papua New Guinea Government will not use a band-aid cure on the crashing currency, its top finance man said yesterday.

Finance and Treasury Minister Bart Philemon said the cabinet had rejected short-term measures such as capital and foreign exchange controls and a possible pegging of the kina, the local currency, to other currencies.

He said: "Such measures were rejected as they would only address the symptoms of the problem and not the fundamental causes, which relate to poor fiscal and macroeconomic management by previous governments."

Philemon said excessive spending and borrowing by previous governments had been identified as the "core cause" of recent currency and price instability.

He added that the cabinet had agreed to implement a package of policy reforms that would, over time, return the country to the macroeconomic stability experienced from independence until the mid 1990s.

A key aspect of that was the totally independent role of the Bank of Papua New Guinea and the governor in setting monetary and exchange policies.

Philemon said the central bank had increased the Kina Facility Rate by 1.5 percent this week to help address the currency situation.

He reaffirmed support for Central Bank Governor Wilson Kamit and rejected speculation that Kamit would be removed.

Speculation over the governor's removal focused on his alleged involvement in the Bank of the South Pacific and Papua New Guinea Banking Corporation merger.

Philemon said the government was looking at reforming and stabilizing macroeconomics through:

· Maintaining the totally independent role of the Central Bank in the setting of monetary and exchange policies and support by Government in all tough actions needed to achieve price stability;

· Managing the 2002 Budget to achieve targets set in the supplementary budget and ensuring that they deliver a responsible 2003 budget with a deficit of around 1 percent of GDP;

· Issuing of detailed policy statements on the government’s agenda for structural reform; and

· Inviting the International Monetary Fund back early next year to negotiate and lead a program of international support that will focus on restructuring the budget.

Philemon said: "An important part of program negotiations will be an attempt to achieve agreement with Australia on some restructuring of existing grant and debt financial assistance so as to lessen domestic financing pressures on the budget."

He is to ask Australia for more time to repay an $A200-million loan and to divert some aid funding to emergency items such as school books and medicine.

For additional reports from The Post-Courier, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Post-Courier (Papua New Guinea).

Pacific Islands News Association (PINA) Website: 

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