treasury.gov.pg : Sovereign Wealth Fund Papua New Guinea

Name of the Organization : Department of Treasury
Type of Facility : Sovereign Wealth Fund
Country : Papua New Guinea

Website : http://www.treasury.gov.pg/html/public_debt/swf.htm

Sovereign Wealth Fund :

In 2010, the NEC agreed to a joint submission from the Treasury/BPNG Joint Working Group and the Department of Enterprises on the proposed establishment of Sovereign Wealth Fund (SWF) for the future management of revenues expected from the LNG and other mineral and petroleum projects. This was outlined in Chapter 12 of the 2011 Budget Volume 1 document.

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The PNG SWF is made up of two funds: the Stabilization Fund and the Development Fund. There will be a single governance framework for the PNG SWF which manages these two funds. The PNG SWF will be onshore managed, offshore invested and onshore spent and it will be fully integrated with the budget and fiscal framework

The Purpose and Objective of the PNG SWF:
The overall objective of the PNG SWF is:
** to support macroeconomic stabilization;
** to support the development objectives of the Government including long-term economic and social development; and
** to support asset management in relation to financial assets accrued from natural resource revenue.

How will it operate?:
All withdrawals from the Fund will be accounted for in the National Budget and approved by Parliament. Spending will focus on the provision of infrastructure development and the delivery of socioeconomic services vital for the advancement of PNG.The PNG Sovereign Wealth Fund will be managed in PNG, invested overseas to grow and then spent in PNG.

How will it affect prices?
In the first half of the 1990s, the mineral boom associated with production from the Misima, Porgera, Kutubu, Tolukuma and Ok Tedi projects increased export earnings, incomes and consumption in PNG. This caused rapid increases in the prices of food, fuel and other essential products.

The PNG Sovereign Wealth Fund can help reduce local price increases by controlling the flow of money into our economy and reducing rapid inflation.

How will it help our farmers?:
The past mineral boom caused the exchange rate to rise. This meant our farmers earned less for their cocoa, coffee, copra and palm oil.

The PNG Sovereign Wealth Fund avoids inflows of large amounts of foreign currency but allows these funds to be brought onshore in a controlled and manageable lots thereby reducing upward pressure on the Kina exchange rate.

Are the funds safe from misuse?:
The PNG Sovereign Wealth Fund will be overseen by an independent board and auditors, and governed by an Organic Law that allows close monitoring of the Fund’s operations. This prevents the drawdown rules from being changed regularly and limits any possible exposure to misuse and corruption.

How will it be transparent?
The PNG Sovereign Wealth Fund will be subject to strict rules based on international best practice for transparency and accountability.

All expenditures from the PNG Sovereign Wealth Fund will be undertaken through the normal budgetary process and disclosed in publicly available budget documents.

An independent PNG Sovereign Wealth Fund board, when in place, will also make all information related to fund investments available to the public. The Board will ensure that the assets in the SWF are invested without any bias and only for the benefit of the Fund.

For more information, please Contact :
SWF Implementation Secretariat on phone 343 7152 / 343 7155 / 323 5600 or email swfforum@treasury.gov.pg on PNG SWF matters.