A lower reserve level means less funds available for the Central Bank to invest in and loss of income to the Government (see chart 10). In the private sector, lower export demand would mean companies would hold back on any expansion plans, save costs by reducing employment and may have difficulties servicing their loans.
Furthermore, foreign investors would delay any new investments in the country given the uncertainties. Generally speaking, economic activity in the country would be lower (see chart 4). For 2009, the Government forecasted a growth in economic activity (GDP) of 6 percent. All this does not augur well for poverty reduction in PNG.