Announcement of Papua New Guinea’s Reform Program Promotes Economic Growth on June 7, 1990

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 90/95 Contact: Richard Kollodge (202) 458-1359 PAPUA NEW GUINEA'S REFORM PROGRAM PROMOTES ECONOMIC GROWTH WASHINGTON, June 7, 1990 -- Papua New Guinea is launching a program of reforms that will help the country maintain financial stability in the wake of the May 1989 closure of the country's main gold and copper mine. The World Bank is providing a $50 million loan to support the progran, which also promotes growth of the economic sectors that are not linked to the mining industry. In the mid-1980s, economic growth picked up in Papua New Guinea. But civil unrest forced the closure of the Bougainville gold and copper mine--which generates millions of dollar3 in export earnings every year--and economic growth slowed. Reform measures include cuts in government spending, increases in government revenues, and tighter credit policies. A realignment of the currency, the kina, and controls on wages will help Papua New Guinea's industries compete in world markets. The program covers improvements in the way the government manages and invests public resources, strengthening of government agencies responsible for formulating and implementing economic reforms, and privatization of public enterprises. It also covers a relaxation of investment regulations and trade- policy reforms. The program is expected to promote the growth of the private sector and help the economy recover from several economic shocks, including the closure of the Bougainville mine. Special measures will be taken to ensure that the poor continue to have access to key social services while the government implements the reforms. The World Bank loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.75 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. Note: Money figures are in U.S. dollar equivalents.