Place your Ad Here!
PNG Business News - February 09, 2021
Kina Drops By 2.9 Per cent Against the US Dollar
According to the Bank South Pacific (BSP) chief executive officer Robin Fleming, the kina depreciated by 2.9 per cent against the US dollar in 2020.“During the course of 2020, the Kina depreciated by 2.9 per cent against the USD, therefore, the cost of goods increase associated with the exchange rate for USD denominated imports would have been around 2.9 per cent,” he said. “For Australian dollar imports, this may have been somewhat higher as the Australian dollar appreciated by 16 per cent against the Kina from last June, predominantly due to movements in the USD and AUD cross rates. In respect to inflation, the most recent publication from the Bank of PNG (BPNG) released in January was that its September 2020 monthly economic review suggests overall inflation is still low.He added, “BPNG’s September 2020 monetary policy has inflation around 3.3 per cent and the Department of Treasury 2021 budget papers indicated inflation for 2020 around four per cent. The BPNG Sept 2020 monthly economic review showed that inflation annual headline retail price index (RPI) to Sept 2020 increased by 0.5 per cent.”This was driven by price increases in alcoholic beverages, among others. According to the BPNG statement, the annual headline inflation decreased from 4.8 per cent in December 2018 to 3.1 per cent in March 2020. This was due to stable or low-income prices in seasonal produce, low imported inflation and high competition. BPNG Governor Loi Bakani said that the import of costs was below 25 per cent.
PNG Business News - February 04, 2021
Barker Says Forex is Very Tight
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.”
PNG Business News - January 22, 2021
Budget Management Committee Meets with Department Heads to Resolve Issues
To work out outstanding issues with government payments, the Budget Management Committee (BMC) met with department heads, the Bank of PNG Governor, Loi Bakani, and BSP CEO, Robin Fleming.The BMC is composed of Chairman and Treasurer, Ian Ling-Stuckey, Finance Minister John Pundari, Planning Minister Rainbo Paita and his Vice Minister, Dr Kobby Bomareo.Ling-Stuckey said, “We have heard the frustrations of our local businesses, Members of Parliament and Government agencies, with late and declined government payments. This has to stop if we are to deliver services to our people. Extraordinarily, as the meeting explored deeper into the underlying issues, there were three main factors that contributed to the bouncing cheque’s issue.”“First, over the last decade, with growing concerns about corruption and new anti-money laundering and counter-terrorist financing laws, there has been an increasing but seemingly, uncoordinated practice to double and triple check the authorisations of payments made by the government,” he said. “More and more of the underlying documentation to authorise payments has had to be sent to both commercial banks as well as BPNG. Second, the updated Kina Automated Transfer System (KATS) introduced by BPNG has modernised many elements of banking in PNG. Cheques used to take 14 days to clear. Now, if they are not cleared in 2 days, they are dishonoured. This means that if all the increased documentation is not provided in only two days, then the cheque will automatically bounce.”He continued, “Third, from September last year, the meeting heard for the first time on Tuesday that the email from the Department of Finance that used to provide the necessary documentation within two days broke down since about September last year and for all of the 4th Quarter, and this was apparently, the primary reason for bounced cheques, according to frank advice tabled by the Deputy Governor of the Bank of PNG (BPNG). So the breakdown in the Finance Department email system, combined with the reduction in the cheque clearance time to two days, combined with the increased duplication of documentation requirements, appears to have contributed and resulted in the recent experience of bounced cheques,” explained the Treasurer.”“In the month of December 2020, government cheques valued over K500,000 that were dishonoured totalled K200 million, of which K74 million were rewritten but dishonoured again. This is clearly unacceptable,” he added. “More needs to be done to deal with the underlying issues. The Budget Management Committee meeting on Tuesday resolved to modernise the government payment system and was advised that the primary solution to ending bounced cheques included adopting electronic transfers for all government payments. It was the view of all BMC ministers and their departments that the very long checklist, adopted by the Bank of PNG, should be reduced, if not, perhaps eliminated altogether, and that oversight of a checklist be transferred back to the Department of Finance and/or the originating source of the funds.”He said, “It is embarrassing that the Government of PNG is unable to meet its bills reliably and on time. Our SME’s are crying out for money they are owed, and all they receive are bouncing cheques. The BMC meeting directed the Secretary of Finance to ensure that the documentation process from the email system does not break down again. I have also asked that a backup system, perhaps a consideration for an encrypted system like WhatsApp that is user friendly, is made to ensure information can get through to BPNG.”“More fundamentally, we must address the underlying issues. Our meeting agreed the multiple document checklist culture must end,” Treasurer Ling-Stuckey said. “Our departmental heads have been tasked to work with the Bank of Papua New Guinea and the commercial banks to do away with outdated practices. We can do this while still maintaining the integrity of our Anti-Money Laundering Laws. Australia and New Zealand manage government payments and their international obligations successfully without needing additional oversight by third parties. It is time we modernised our systems to bring them in line with international best practice. Countries like Fiji have used electronic transfers for years. It is embarrassing that PNG is still stuck in 1975 issuing a very large share of payments through paper cheques. Cheques create opportunities for corruption and slow down our financial system.”Meanwhile, Minister Pundari said the Department of Finance need to review the Financial Management System and come out with a plan to move towards electronic transactions. He stated, “This will stop the perennial problem of bouncing cheques. You can’t electronically transact funds that you don’t hold. Our private sector relies on electronic transactions. It is time our public sector moved to a modern payment system suitable for a rapidly developing country like Papua New Guinea.”
PNG Business News - January 04, 2021
Forex May Slow Down in 2021
Foreign exchange inflows may be lower in 2021.This is according to the bank of South Pacific, that said that this is due to the delay in an agreement between Barrick Niugini and the government on the Porgera gold mine. Chief executive officer Robin Fleming said that there were several factors that would impact the availability of foreign exchange this year, including the delay in resolving dialogue on the Porgera mine. “Resolution of the discussions between the Government and Barrick on the Porgera mine is important from a foreign exchange availability perspective with annual inflows associated with working capital for the mine having been significant,” he said. “Delays in reaching an agreement will see foreign exchange inflows being lower in 2021 than was the case in 2020.”Last April 24, 2020, the government said that it would not renew the special mining lease of BNL. Fleming also said that the prices of oil continue to impact benefits directed to the government and other PNG LNG liquefied natural gas) stakeholders and an increase in costs above US$50 (K172.22) per barrel will have some advantage for PNG.“Ok Tedi has been a great success story and as a wholly-owned PNG company, they continue to provide support for the foreign exchange markets and with their upgraded capacity and operating efficiency they should continue to support the foreign exchange market,” he said.Fleming added that the project of Papua LNG with operator Total is a key factor for the positive outcome in 2021 - as well as the availability of vaccines for COVID-19. He said that businesses may not continue until the availability of these vaccines as areas such as Tonga, Fiji, Samoa, Vanuatu rely heavily on tourism. “In PNG, the hotel sector had been experiencing oversupply towards the end of 2019 and this was made worse by international travel restrictions, hence, again the importance of a vaccine and resumption of more regular travel, which will benefit our airlines,” he said. “As business demand increases, employment increases and with a lag factor, government goods tax and services and tax revenue increases.”
PNG Business News - December 09, 2020
Baker: Availability of Foreign Currency Still A Challenge
The availability of foreign currency in PNG is still very challenging.This, according to ANZ PNG managing director Mark Baker, who said this was because the market was still imbalanced. He added that this demand for foreign exchange was outrunning supply which came mainly from the commodity exporters of Papua New Guinea. “This is a structural imbalance and will only correct itself in the near term with an influx of foreign direct investment (FDI),” Baker said. “The main source of FDI would be from the major resource projects which are still under negotiation between the government and the project sponsors. Other sectors of the economy that generate foreign exchange, such as agriculture, are currently still too small to bridge the foreign exchange gap. In the longer term, the solution is the development of a broader-based economy where the sources of foreign currency are more varied. The development of a broader-based economy requires infrastructure investment, in particular roads to facilitate an effective supply chain and power to facilitate a cost-effective local manufacturing sector.”On the suggested increase by banks of taxes, Baker said that it is important to have wide and detailed consultations - including the banks themselves. He said that banks in PNG have the most diligent taxpayers and their operations are funded by public and private sectors. “As with any such measures, there is the potential for unforeseen outcomes and proposed changes like these needs to be very carefully thought through,” Baker said.
PNG Business News - October 07, 2020
Business Industry: Devaluing Kina Not An Option
When the Business Council proposed two options for the Bank of PNG to move forward - trading at its market value and devaluing kina - the business space suddenly put its foot down. They claim that smaller businesses are more worried than ever and are asking the government to establish a policy framework that can help them. According to Executive Director Douveri Henao, PNG is experiencing difficult times and during this health crisis, there is a need to make the kina attractive to the world for the country's exports. “Largely because the whole world has literally come to a point where they’re not trading in noble conditions and our Kina should also not be trading in noble conditions,” he said in a statement. That’s one of the reasons why we’re also encouraging the monetary policymakers to consider these two options.”Mr Hanao added that all economies around the world are currently making monetary adjustments whether devaluing their currencies or quantitative easing but still, the idea is to make the currency more tradable, effective, and attractive. “That’s where we see the opportunity is presenting itself to revisit the trading of the kina in these very difficult and different times where it should be of consideration,” he said. In a previous interview with the Central Bank Governor Loi Bakani, he maintained that devaluing kina doesn’t work with the country and this is a prescription for a well-developed economy. He added that while the kina has been depreciating at a slow pace, the currency can still move forward - it is just that PNG has a one-sided market. He added that when a depreciation happens, reforms or other changes in the economy should transpire. He said that the Bank of PNG was in discussions with the Australian Treasury to involve market experts from Australia to aid the PNG to improve the domestic interbank market for a price-setting mechanism which works better than the current one.
PNG Business News - October 05, 2020
Bank of PNG: GDP Declines by 4%
Because of the economic downturn brought about by the global health crisis, the Bank of Papua New Guinea has revised its outlook on the gross domestic product (GDP) to decline by 4%, a downward spiral from its original projection last March 2020 of 0.3 per cent. This decline is also brought about by the imposing of State Emergency, lockdown and various policies and programs to contain the virus, thus affecting economic growth. The Central Bank expects that the impact of COVID-19 will continue for the rest of 2020 and into 2021.In a statement, the Central Bank said that this revision mirrors the negative growth in PNG’s major trading partners, as well as the containment measures instituted by the government and temporary shutdown of major mining operations. “The closure of Porgera mine since April, 2020 due to the expiry and non-renewal of the Special Mining Lease for the operator, Barrick (Niugini) Limited, also contributed to this negative growth,” it said, “In the non-mineral sector, most sectors are expected to record lower growth.”The Central Bank also noted that among the most affected include hotels, financial and insurance services, construction, and transportation.“To maintain their operations, most firms have reduced their costs by laying off workers, reducing working hours and delaying investment plans,” the bank stated in a statement.In the first six months since the pandemic started, the Bank conducted a survey to evaluate the impact of COVID=19 to businesses, particularly the Micro, Small, and Medium Enterprises (MSMEs) in the sectors of manufacturing, construction, professional, and information services. The bank found out that over two-thirds have scaled down their operations while the rest survey closed their businesses and expected to continue for the rest of the year. The bank stated, “MSMEs experienced disruptions in their supply chains and cash flow, lower demand, reduced workforce and increased arrears to service providers and on loans.”
PNG Business News - June 15, 2019
Improvements in most PNG export commodity prices
The latest international commodity price data published by the World Bank in April 2019, show improvements for most of PNG’s export commodity prices of energy, metals and non-energy commodities, compared to actual outcomes in December 2018. Bank of PNG Governor, Loi Bakani stated that price for Liquefied Natural Gas (LNG) based on imports to Japan increased by 0.7 percent to US$11.87 per one million British thermal units (btmu), while price of crude oil by West Texas Intermediate fell by 6.6 percent to US$54.9 per barrel. The prices of most metals and mineral increased, with price of silver increasing by 6.8 percent to US$15.6 per ounce, gold by 6.1 percent to US$1,304.0 per ounce and copper by 1.8 percent to US$6,226 per metric tonne (mt). For non-energy commodities, prices increased for palm oil by 5.8 percent to US$578 per metric tonne and coffee (Arabica) by 2.8 percent.to US$2.24 per kg, while cocoa fell by 5.1 percent to US$2.95 per kg. Governor Bakani encouraged the export sector to take advantage of some of the high commodity prices and increase production levels, especially for the agricultural export commodities. This also includes boosting local production for domestic consumption and replacing similar imported items. He noted the importance of a sustainable export sector as the main source of foreign exchange and reiterated that every support is needed from the private sector, growers and the Government to expand this sector. “Without the right policies and support from all stakeholders to grow this sector, the on-going issues confronting the foreign exchange market in terms of lower foreign exchange inflows and build-up of import orders will continue to persist. This will put pressure on the exchange rate and domestic inflation. While the Central Bank can intervene to support the market, its capacity to do so continuously is limited by its accumulated level of foreign exchange reserves,” he said. Large investment projects such as the Papua LNG and Wafi Gold projects are expected to increase foreign exchange inflows soon like many of these major projects in the past, however, these inflows are not sustainable in the long run. Therefore, growing the non-mineral export sector is critical for long term sustainable and inclusive growth because the majority of our people are engaged in this sector, especially the agriculture sector. During the March quarter of 2019, the average daily kina exchange rate depreciated against the Japanese yen by 2.6 percent to ¥32.6844, pound sterling by 0.3 percent to 0.2301 and the US dollar by 0.2 percent to US$0.2968. Against the Australian dollar and euro, it appreciated by 0.6 percent to A$0.4170 and 0.3 percent to €0.2613, respectively. w