Monetary History Overview

Historical Sketch

The island of New Guinea was discovered for the Europeans by Spanish navigators in the In the 1520s, Portuguese and Spanish navigators were the first Europeans to arrive at the island of New Guinea, a name created by the Spanish. The Dutch United East India Company (VOC) laid claim to the western part already in 1660, which was renewed by the Dutch government in 1828. No settlements or trading posts had been established at that time. This only began at the end of the 19th century. Nevertheless, in 1884 the island of New Guinea was formally partitioned between three European colonial powers, the Netherlands (west), Great Britain (southeast) and Germany (northeast). German New Guinea was initially administered by the German New Guinea Company until colonial rule was established in 1899. British New Guinea was transferred to authority of Australia in 1902 and renamed into Papua Territory three years later. German New Guinea got occupied by Australian troops during World War I, and subsequently became the Australian New Guinea Territory under a League of Nations mandate. During the Pacific War, Japan occupied both Australian territories, as well as the Dutch part in the west, and held it until the final defeat in 1945. The Australian rule continued after the war under a UN trusteeship mandate, with the two territories being combined into an “administrative union”. In 1971, they were merged into Papua New Guinea, which finally attained independence in 1975.

In pre-colonial times the monetary economy was not widespread in New Guinea. Barter dominated, in which various natural products such as shells or feathers had a money-like character. In the Northeast, the German New Guinea Company introduced the Reichsmark accounting in 1887, and German coins were introduced. But gold and silver remained scarce such that the Company began issuing local coins in 1894. The so-called "New Guinea Mark" was equal to the German Reichsmark but, in order to block the outflow, could not be converted into German money. Instead, it had to be exchanged into cheques which were refundable only at the Company's head office in Berlin. The coins were recalled in 1911 but tolerated until 1914. The British-Australian administration did not introduce a special monetary order in the Southeastern territory. In 1889, the legislation of Queensland was made applicable to British New Guinea (later Papua) which also meant the introduction of the British, after 1910 Australian accounting. The Australian occupation and colonization of German New Guinea during World War I triggered the introduction of the Australian currency, which was made formal by the 1922 currency ordinance. In the 1930s, Australia introduced distinct subsidiary coinage for New Guinea (not clear the coins circulated also in Papua). In 1942, Japan conquered Papua and parts of New Guinea during the Pacific War. The military administration introduced the Japanese Military Yen in August 1942, like it was the case for all the conquered territories, the denomination of the occupation notes being "Shilling". The Australian Shilling was exchanged at par, which corresponded to a devaluation by more than 27%. After the Japanese defeat in September 1945, the pre-war currency was restored. The occupation notes were declared invalid without compensation. Papua New Guinea's independence in 1975 was accompanied by the creation of the Papua New Guinean Kina as national currency. The Bank of Papua New Guinea had begun operations already in November 1973. The Kina replaced the Australian Dollar on par, and parity was preserved for about a year. Since the Australian Dollar began devaluing in mid-1976, the Kina upvalued twice and finally severed the link in December 1976, to be tied to a trade-weighted currency basked afterwards. In the early 1980s and again in the late 1990s, the Kina depreciated considerably during political crises. Since the mid-2000s, it has remained more or less stable.

Papua New Guinea joined the International Monetary Fund (IMF) on 09.10.1975.

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