According to Institute of National Affairs (INA) executive director Paul Barker, foreign exchange (forex) has stayed very tight since 2017, considered to be one of the major hindrances to investments and businesses in PNG.
He added that his concern was the imbalance in the markets, partly linked with rigidities in the setting of exchange rates, and the unusual scene of a strong positive current account balance where a section of exports get remitted to PNG.
“While servicing major commercial overseas debt prevails, it combines increasingly with the need for servicing the growing foreign public debt,” Barker said. “The foreign exchange that has been available has effectively been rationed, with priority expenditure taking precedence, including fuel, food and debt servicing, while remitting dividends overseas has largely been on hold for several years.”
On “certain privileged persons able to secure precedence, Barker said he won’t comment further on that.
He said that most businesses need foreign exchange for different reasons.
“Even exporters needed to pay for replacement plant and equipment, sometimes for technical inputs,” he said. “And undue constraint can also handicap their capacity to produce and export. It becomes a vicious circle.”
Although the situation was improving in 2018 and 2019, Barker said, “But 2020 saw the collapse in prices of several major export commodities. This included liquefied natural gas/oil, copper and vegetable oil at the start of the year. It was associated with the severe fall in demand linked to the Covid-19 pandemic and was not balanced by the strengthened gold prices, particularly following the closure of the country’s second-largest gold mine, Porgera.”