2010年-世界发展银行全球_Managing_Resource-Induced_Volatility_in_Papua_New_Guinea___Some_Issues_for_Discussion_37页_876kb

Summary of "Managing Resource-Induced Volatility in Papua New Guinea: Some Issues for Discussion"

Core Content

This document discusses the challenges of managing resource-induced volatility in Papua New Guinea (PNG), with a focus on fiscal policy, institutional structures, and the role of mineral resources in the economy. It outlines key issues and proposes options for improving the management of resource-related revenues to ensure long-term fiscal and macroeconomic stability.

Main Points

• Economic Vulnerability to Commodity Prices: PNG's economy is highly vulnerable to fluctuations in global commodity prices due to the significant role of the mineral sector in production, exports, and government revenues.
• Mineral Exports: Metals (gold and copper) and mineral fuels (petroleum) account for 80% of exports and 33% of GDP value added. Mineral exports surged during the 2004-2008 commodity boom, with gold and copper exports increasing substantially.
• PNG LNG Project: The PNG Liquefied Natural Gas (PNG LNG) project, set to start production in 2013-2014, is expected to significantly increase export revenues, potentially doubling the record high from 2008. It is projected to yield over $3 billion in annual export revenues.
• Investment in Mineral Projects: The mineral sector has attracted a large share of foreign direct investment (FDI) and fixed investment. Several major projects, including the Ramu Nickel Project and the Freida River Copper Project, are in development or under consideration.
• Commodity Price Volatility: Despite a decline from 2008 highs, commodity prices remain volatile. This volatility is compounded by production issues in mines, such as accidents and maintenance, which affect output and export patterns.
• Fiscal Impact of Resource Volatility: Mineral revenues have fluctuated significantly, rising to over 14% of GDP in 2007 and falling to about 3.9% in 2009. The fiscal deficit has also fluctuated, increasing in 2009 due to lower mineral revenues.
• Fiscal Policy and Stabilization Mechanisms: The document highlights the importance of fiscal rules and stabilization mechanisms in managing resource-induced volatility. It recommends strengthening counter-cyclical fiscal policies and introducing a single Savings and Stabilization Fund (SSF) to better manage resource-related revenues.
• Options for Improvement: The report suggests several options for improving fiscal management, including adjusting fiscal rules based on commodity prices and economic activity, creating a single SSF, and integrating trust funds with the central budget.

Key Information

• Currency Equivalents: US$1.00 = 2.6469 Kina
• Government Fiscal Year: January 1 – December 31
• Key Acronyms:
  • ABG: Autonomous Bougainville Government
  • CSF: Copper Stabilization Fund
  • DSA: Debt Sustainability Analysis
  • FEES: Economic and Social Stabilization Fund
  • MRSF: Mineral Resources Stabilization Fund
  • MTDS: Medium Term Development Strategy
  • MTFS: Medium Term Fiscal Strategy
  • NRF: Nonrenewable Resource Fund
  • RERF: Revenue Equalization Reserve Fund
• Fiscal Rules:
  • Adjust the non-mineral ongoing deficit rule based on commodity prices and economic activity.
  • Introduce a government spending rule to limit expenditures relative to GDP.
  • Recalculate the sustainable fiscal balance annually.
• Savings and Stabilization Fund:
  • Merge all trust accounts into a single SSF.
  • Integrate the fund with the budget and ensure transparency and international best practices in governance and asset management.
  • Prohibit the Fund from investing in PNG government debt and limit investments to foreign currencies.
• Lessons from Past Episodes:
  • PNG's fiscal prudence during the commodity boom helped build buffers and cushion the impact of the global crisis.
  • Strengthening the Medium-Term Fiscal Strategy (MTFS) and trust fund accounts is crucial for long-term stability.
• Economic Diversification:
  • The non-mineral part of the economy remains underdeveloped, with most GDP coming from agriculture and low-value services.
  • The dual economy structure, with extractive industries as the modern sector and the rest as traditional, poses challenges for sustainable development.

Conclusion

The document emphasizes the need for robust fiscal institutions and rules to manage resource-induced volatility, ensuring that the benefits of resource wealth are used to improve infrastructure, education, and the business climate, while reducing dependency on volatile resource prices. It proposes a range of options, with the creation of a single Savings and Stabilization Fund being the most preferred, but also outlines alternatives if this is not feasible. The World Bank offers support in analyzing these options and narrowing down policy choices.