This affects monetary policy because the Government has placed the majority of the deposits, currently around 2.5 billion kina, at commercial banks, which the Bank of PNG has then sterilized through Central Bank Bill issuance. This poor coordination may cost the Bank of PNG, and ultimately the Government, around K70 million per year in interest costs.
3,000  2,500  2,000  Location of Government Deposits (K million) Government Deposits at Commercial Banks Government Deposits at BPNG  1,500  1,000  500  Ja n06 Ap r- 0 6 Ju l-0 6 O ct -0 6 Ja n07 Ap r- 0 7 Ju l-0 7 O ct -0 7 Ja n08 Ap r- 0 8 Ju l-0 8 O ct -0 8 Ja n09 Ap r- 0 9 Ju l-0 9 O ct -0 9 Ja n10 Ap r- 1 0 Ju l-1 0 O ct -1 0 Ja n11 Ap r- 1 1  0  Source: Bank of PNG staff calculations.