Structural Adjustment Programme in Papua New Guinea

The Structural Adjustment Programme (SAP) was devised in 1990 in response to the adverse effects on the economy of the closure of the Bougainville Copper Mine and the fall in the export prices of PNG’s agricultural products in 1989. Under the SAP the government hoped to cut public expenditure; reduce domestic demand by cutting wages; encourage private investment by decreasing government regulation; maintain exchange rate competitiveness by a 10 percent devaluation of the kina; and improve resource management. The major elements of the SAP include a $US50 million structural adjustment loan (World Bank), $US80 million agriculture program loan (Asian Development Bank) and a $US43 million (SDR) loan. There is also a substantial International Monetary Fund (IMF) “standby” loan to which PNG can have access if it meets certain economic goals established by the IMF. To complement the SAP, the government implemented, with strong support from aid-giving countries, a Special Intervention Programme to support housing projects, health projects and small-scale industries.

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