Photo: BSP Group General Manager Treasury Rohan George
“Lower commodity prices and the delay in Porgera’s resumption is expected to prolong distress in PNG’s foreign exchange market,” according to the BSP Quarter 1 2023 Economic Insight report.
BSP’s Group General Manager for Treasury, Mr. Rohan George said “FX market turnover in the March Quarter fell 2.4%, from the December Quarter 2022”. He noted, “a pullback in commodity prices, in particular oil, copper and palm oil, and the January holiday season reduced FX market turnover volumes”.
According to Mr. George, “FX turnover for 2023 increased by 8.9%, compared to prior year”. However, he also advised that outstanding FX orders with BSP increased seven fold (700%) in the past quarter, with post-Christmas import orders increasing rapidly, whilst FX inflows fell.
The kina mid-rate was stable against the U.S. dollar at 0.2840. The Australian dollar fell 1.5%, reflecting weaker commodity prices, concerns of an economic slowdown and a pause in interest rate increases.
Mr. George noted that BPNG FX intervention in the March Quarter remains unchanged, but rose 59% from one year ago. He further added, “despite increased BPNG intervention, the PNG FX market continues to miss the foreign currency contribution from Porgera.”
“After subdued FX inflows in the March quarter, we do not expect a pickup in FX inflows in the June quarter. BPNG will continue to support the market, however subdued commodity prices and the uncertain global environment will see outstanding FX orders remain at high levels and subsequent FX order execution times lengthy,” Mr. George concluded.
To manage volatility in foreign currency flows, businesses should place FX orders (with correct documentation), as soon as possible, ensure orders are cash backed whilst awaiting execution, tax clearance certificates are current and reflect the expected FX order execution time.