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11 views2 pages

Document

Uploaded by

Karrina Daure
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TOPIC 10:

Monetary and fiscal policies are crucial mechanisms for managing a


country’s economy, specifically in Papua New Guinea (PNG). Monetary policy,
overseen by the Bank of Papua New Guinea, focuses on controlling money
supply and interest rates to achieve price stability, control inflation, and
stimulate economic growth. Key tools include adjusting interest rates, open
market operations, and reserve requirements. Fiscal policy, managed by the
government, employs taxation and spending to influence economic activity,
with budget preparation and approval being fundamental processes. The
government budget reflects fiscal policy and addresses economic stability,
resource allocation, and public accountability. PNG’s reliance on natural
resources and external aid poses challenges to effective fiscal management.
Both monetary and fiscal policies are essential for addressing economic
fluctuations, managing public debt, and promoting long-term development.

Key Insights

The central bank employs various tools to manage inflation and stabilize the
economy.

Fiscal policy in PNG faces challenges due to its dependence on natural


resource revenues and global commodity price fluctuations.

Infrastructure investment is a key focus of fiscal policy for promoting


economic growth.

The effectiveness of fiscal policy is often hindered by issues such as


corruption and inefficient project management.

Collaboration with international organizations, including the IMF and the


World Bank, is vital for enhancing PNG’s monetary and fiscal frameworks.

Frequently Asked Questions

What are the main objectives of monetary policy in Papua New Guinea?

The main objectives include achieving price stability, controlling inflation,


managing unemployment levels, and fostering economic growth.
How does fiscal policy influence the economy in PNG?

Fiscal policy influences the economy through government spending and


taxation, directly impacting economic activity, public service provision, and
income redistribution.

What are the challenges faced by PNG in managing its fiscal policy?

PNG faces challenges such as reliance on natural resources, budget deficits,


inefficiencies in project implementation, and difficulties in revenue collection
from the informal economy.

How does the Bank of Papua New Guinea collaborate with international
organizations?

The Bank of Papua New Guinea collaborates with institutions like the IMF and
ADB for technical assistance and policy advice to strengthen monetary policy
and financial stability.

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