PNG MOVES TO FIX FLAWED SOVEREIGN WEALTH FUND LAW

The Papua New Guinea government is taking urgent steps to fix the flawed Organic Law on the Sovereign Wealth Fund (OLSWF), which has prevented the SWF from becoming operational since its enactment in 2015.

Minister for Rural and Economic Development, Joseph Lelang, sought and received directions from the National Executive Council (NEC) to revise the law.

He stressed that a properly established SWF is vital for macroeconomic stabilization through improved foreign exchange and cashflow management, and for saving funds for future generations.

According to Minister Lelang, the current design is critically flawed, particularly regarding the:

• Stabilization Fund Withdrawal Formula, which is inconsistent with the government's fiscal consolidation strategy.

• Dividend Policy.

To address these issues and operationalize the fund, Cabinet has established a Technical Team under Minister Lelang's Ministry.

• Lead: The team will be headed by Mr. Ian Tarutia as the Chief Technical Advisor.

• Composition: Members include experts from the Department of Treasury, Bank of Papua New Guinea (BPNG), Department of Attorney General, Kumul Consolidated Holdings (KCH), KPMG, and others.

• Funding: The NEC approved an initial K3 million to support the team’s work.

The Technical Team has been given six months to complete consultations and draft two key legislative documents:

1. Amended Organic Law on SWF (OLSWF): This will be simplified to make it more general and to guide the overall establishment of the fund.

2. SWF Enabling Legislation: This new law will contain the detailed operational policies currently missing or flawed in the OLSWF. Key specifics to be included are:

• Agreed dividend payment policy.

• Investment and expenditure strategies.

• Asset risk management strategies.

• Recruitment and appointment processes.

• Specific powers and functions of the Minister, Board, and CEO.

• A trigger mechanism for releasing funds to stabilize government cashflow under the Stabilization sub-fund.

The amendments and the new enabling legislation are scheduled to go before Parliament for approval next year. The government’s goal is to have the SWF commence operations before the 2027 National Elections.