PNGX, Papua New Guinea’s national stock exchange, has today released a proposed new Corporate Governance Code for Listed Issuers for public consultation. PNGX is proposing to introduce a new Corporate Governance Code for the guidance of Boards of listed issuers. The proposed Code contains 17 Standards. Within each of the 17 Standards are a number of Recommendations. Each PNGX listed company is required under the Listing Rules to have corporate governance policies which are appropriate having regard to the nature and scale of its operations. Each company should address each Recommendation set out in the Standards. It is also required to include in its annual report a corporate governance statement or the URL of the page on its website where a corporate governance statement is located. While the proposed Code has been developed by reference to global standards and practices adopted in other markets, it has been adapted to have regard to the characteristics of the PNG market and to be fit for purpose for the country. The Standards and Recommendations are not prescriptive. Each company is at liberty to either adopt the Standards and Recommendations or not. However, as they are standards of expectations established through a mechanism of industry and stakeholder consultation, it is expected that directors should disclose in the company’s annual report the extent to which the company has adhered to the Standards and Recommendations, and where there has been no or partial adoption, to give reasons. This “if not, why not” approach is common in markets globally. Whilst the scope of the Code is limited to listed companies, it is hoped that the governance standards become a benchmark for corporate governance by the private sector in PNG generally. They may also have relevance to governance of SOEs. The draft Code has been developed based upon the existing PNGX corporate governance standards and with the assistance of the International Finance Corporation (IFC) and the UN Sustainable Stock Exchanges Initiative, which PNGX joined in April 2022. IFC has provided an expert education program relating to the development of environmental, social and governance (ESG) rules to help create appropriate disclosure standards for PNGX and its companies. Expert training on board gender diversity was also provided. This laid the foundations for a new corporate governance code that, importantly, factors in gender and other elements specific to PNGX. The IFC input has been integral to aligning the proposed standards with international best practice for developing markets and the revised OECD Principles of Corporate Governance to be issued in 2023. PNGX has solidified its commitment to transparency and sustainability by becoming a partner exchange of the Sustainable Stock Exchanges Initiative which brings together over 110 stock exchanges around the world that are committed to promoting sustainable development. This supports PNGX to help develop the Papua New Guinea capital markets and support the sustainability of the PNG economy. The Pacific Private Sector Development Initiative (PSDI) also contributed to the development of the corporate governance standards. PSDI is an Asian Development Bank (ADB) technical assistance program in partnership with the Governments of Australia and New Zealand. PNGX recognizes the number of sustainability challenges that an emerging economy like Papua New Guinea face, which include access to capital for SMEs, corporate governance and transparency, climate change, gender equality, gender-based violence, and environmental sustainability. Addressing sustainability factors is of increasing importance to obtaining access to finance in today’s world and PNGX is committed to it. The majority of the Recommendations are directed towards matters specific to internal governance and controls of listed companies consistent with international practices. In addition, they include a number of recommendations relating to social challenges within Papua New Guinea including policies supporting equality of gender representation and remuneration, return to work practices and gender-based violence. PNGX Chairman, Mr David Lawrence, said “Efforts to enhance the corporate governance standards in PNG are one contribution PNGX can make, in partnership with like-minded stakeholders, to lift the reputation of PNG, improve its ability to attract investment and lower the cost of capital for the country. In a time of considerable global disruption arising from pandemics, war and inflation, establishing a vision and standards for the future become particularly important.” PNGX General Manager, Ms Elizabeth Wamsa, said “The Code includes Recommendations to encourage a broader pool of directors for PNG companies, especially female directors. The Recommendations also include expected disclosures regarding gender pay equality policies, ‘return to work’ policies (for example, women returning to work after childbirth) and gender-based violence policies”. “Good corporate governance enhances the performance of companies and increases their access to outside capital. It is great to see PNGX proposing these new, world class standards, which have been adapted for the local market,” said IFC Resident Representative for Papua New Guinea, Markus Scheuermaier. “These new measures are also innovative as they include standards around workplace response to gender-based violence, and on childcare. We are proud to support PNGX in this groundbreaking initiative.” Mr Jeremy Cleaver, Senior Finance Sector Specialist, Pacific Private Sector Development Initiative (PSDI), Asian Development Bank said “the Standards in the Code are very robust and detailed and we are supportive of them. The positive results of PNGX working with IFC and the Sustainable Stock Exchanges Initiative come through clearly, particularly in terms of gender and climate related issues. We are happy with the Standards and fully support them.” PNGX is releasing the proposed Corporate Governance Code for Listed Issuers for consultation and feedback from interested parties. The proposed Corporate Governance Code for Listed Companies is available on the PNGX website. The consultation period will be open for 2 months.

Photo: Greg Pawson. Credit: Kina Bank Facebook Page Kina Bank's CEO and Managing Director, Greg Pawson, has called for more competition in the banking sector in Papua New Guinea. According to Pawson, the recent 50% increase in corporate income tax to 45% will make it difficult for other banks to compete. He also stated that the decision to increase the tax was made without considering the true consequences of how it would impact the ability of a strong challenge brand to continue its growth agenda. In a statement made while announcing Kina Bank's 2022 financial year results, Pawson expressed disappointment in the tax increase and described it as a hindrance to the remainder of the bank's 2025 strategic plan. He said: “The announcement by the government in the December budget for a 50 per cent increase in Corporate Tax for Commercial Banks to 45 per cent is disappointing and a hindrance in the remainder of the 2025 strategic plan. Not only is this quite possibly one of the highest tax rates in the world, it targets a sector of the market that is critical for supporting PNG’s economic growth aspirations." Pawson stressed that more banking competition was needed in the country, but the additional tax would make the one major bank stronger and weaken competition due to a lack of size and limited investment to expand and grow. He said: “More banking competition is required in PNG, however, this additional tax impost will simply make the one major bank stronger and weaken competition due to a comparatively lack of size and therefore limited investment to expand and grow.” Pawson further commented that many organizations in the country need to pay taxes, but they are not doing so. He urged the Internal Revenue Commission (IRC) to improve its underlying efficiency to ensure that those businesses pay taxes and bring more business from the informal sector into the formal sector. Currently, Kina Bank pays K32 million in taxes. He said: “The IRC (Internal Revenue Commission) has the mandate to improve their underlying efficiency to ensure that those businesses are paying tax and bringing more business from the informal sector into the formal sector.”

Photo: BSP’s Acting Group CEO Ronesh Dayal BSP delivers a record K1.136 billion underlying profit, with BSP’s statutory profit reducing to K1.081 billion once the impacts of the new PNG government taxes are applied. Consequently, BSP’s shareholders K1.74 full year dividend was only marginally higher (0.6%) than the prior year’s K1.73. According to BSP’s Acting Group CEO Ronesh Dayal, the result was impacted by the K190 million Additional Company Tax (ACT) and a one-off tax credit of K135 million. The tax credit comes after PNG Bank’s closing deferred tax assets and liabilities for 2022 were re-measured at 45%, in accordance with international accounting standards, given the PNG commercial bank tax rate increase from 30% to 45% in 2023. “Despite these challenges, BSP has posted a record K1.081 billion statutory net profit after tax (NPAT), up 0.5% from the prior year NPAT of K1.075 billion,” Mr. Dayal stated. He also noted that the Group’s underlying NPAT was K1.136 billion, excluding one-off tax impacts and represents a 5.7% increase on 2021 profits. “Improved economic conditions in the Pacific with the reopening of borders and resumption of business activities were the key drivers of the underlying result. Consequently, net interest income increased by 8.8%, foreign exchange income increased by 11.2%, and total loans increased by 4.6% to K15 billion,” stated Mr. Dayal when commenting on the key Group highlights. Maintaining a dividend payout ratio of 75%, BSP has declared K813.5 million in dividends to shareholders for FY2022. A final dividend of K1.40 per share, payable on 21 April 2023, combined with the K0.34 per share interim dividend paid on 14 October 2022, brings the dividend per share for FY2022 to K1.74. Mr. Dayal added that BSP continues to be an attractive prospect for investment, “BSP’s dividend yield is 14.0% and 14.6% on the PNGX and ASX respectively, which is a high-yielding asset compared to other stocks on both markets.” Mr. Dayal stated that a key focus in 2023 will be adapting to the tax rate increase to 45% on PNG commercial banks. “The tax rate increase to 45% on PNG commercial banks from January 2023 has the potential to impede investment and growth in PNG’s financial sector. Further, the sector targeted tax is counterproductive for the long-term economic growth ambitions of PNG,” he added. Mr. Dayal concluded by saying, “Despite the regulatory and operational challenges, BSP remains committed to the prosperity of PNG and countries in the Pacific. BSP currently has no plans to scale back its existing network or reduce its services in PNG as a result of the tax rate increase.” “We understand that banking is a vital service for all communities where we operate, many of which have no other accessible banking alternatives. Providing services to our customers is a core philosophy and remains an essential part of what we do here at BSP,” he concluded.

Photo: Greg Pawson Kina Securities Limited, has reported an underlying net profit after tax of K106.1 million for the financial year 2022, representing a 10.3% increase from the prior corresponding period (PCP). Kina’s CEO, Greg Pawson, said that the result was "pleasing" and demonstrated the company's commitment to its strategic plan. He also highlighted the diversified income streams, increased revenues in digital channels, and solid growth in Kina’s core business as contributing factors to the company's success. In addition, Pawson noted that Kina's underlying return on equity remained above 15%, at 17.9%, and that the company maintained a robust balance sheet, with regulatory capital at 22.5%, well above the minimum requirement. He emphasized that the strong results demonstrated Kina’s ability to execute a revenue diversification strategy, with 50% of income derived from non-interest products. Despite the challenging business environment in Papua New Guinea, Kina's overall lending increased by 11% against PCP, with the overall balance exceeding K2.1 billion. Commercial lending was up 9.6%, which included a strong year-on-year SME growth of 25% and home lending up 19%. However, in December 2022, the PNG government announced an increase in corporate income tax on commercial banks from 30% to 45% for the 2023 fiscal year. The increase in the rate took effect on January 1, 2023. Kina’s deferred taxes at December 2022 were revalued at the new rate in line with IFRS, resulting in a tax credit of K10.4 million in 2022 statutory net profit after tax (NPAT). Kina’s FY2022 statutory NPAT was K116.5 million (including tax credit), while the underlying NPAT was K106.1 million. Pawson stated that Kina continues to engage with the government regarding possible alternative tax treatments that will support economic growth in PNG. In summary, Kina Securities' FY22 financial results were strong, demonstrating the company's ability to execute its strategic plan, despite challenging business conditions. Pawson’s comments highlight Kina's commitment to revenue diversification, solid growth, and maintaining a robust balance sheet to navigate changing market conditions.

"The Bank of Papua New Guinea has an excess of US$3.7 billion (K13 billion) worth of foreign reserves sitting in the bank that can cater for the country for one year," said Prime Minister James Marape in response to questions raised by the Governor for Southern Highlands William Powi in Parliament. He went on to say, "I was informed by BPNG that the Central Bank has K13 billion (US$3.7 billion) in foreign reserves currently in the bank," and, "the K13 billion currently at the Central Bank is the highest the country has held in reserve at the Central Bank." Marape also addressed the FX issue between Puma Energy and the Bank of PNG, stating, "BPNG did allow Puma Energy to be on the board for the commercial bank order to supply FX to Puma to do their purchase because BPNG saw an unusual order of FX from Puma and felt that Puma needed to answer to those issues." He went on to emphasize the importance of the BPNG's role in ensuring the foreign reserve threshold in the country is suitable for the economy and emphasized the need for the monthly release of US dollars into commercial banks for them to transact and supply to those who need US dollars for import expenses. "This issue points us to the fact that we need to relook at how Central Bank regulates and controls flow of FX to commercial banks and traders. We want ease of forex to our business community," said Marape in reference to the FX issue with Puma Energy and the wider business community's need for FX, especially for the import of products into PNG.

Photo credit: Internal Revenue Commission PNG - Revenue Haus in Port Moresby The Internal Revenue Commission has collected a record revenue of K15 billion for the public purse this year, according to Prime Minister, James Marape. In a media statement PM Marape has commended the management and staff of Internal Revenue Commission (IRC) for being an exemplary public service organization whose performance, he said, has been improving year after year in the work they do with increasing revenue collection for the country. The Prime Minister said this during an event he officiated yesterday for the launch of the organisation’s 2022 Work Plan and 5-Year Corporate Plan. “ICR, thank you very much for another successful year. I say thank you to you all – from the management down to the staff, every one of you who make this organisation functional,” said the Prime Minister. “Thank you for putting together a K15 billion revenue this year. “In 2021, without the oil price increase, you collected about K270 million for our country. “In 2020 during the COVID-19 year, when the entire planet shut down, you collected over 100 percent, beyond what we asked of you to collect. “This is an indication to the country that IRC is not sleeping but has been working. Your performance speaks for itself. Numbers do not lie. “It is also an indication to all government departments that the organization that makes money takes precedence. We must support them.” Prime Minister Marape assured IRC that his Government would fully support its 2023 work plan and that he was looking forward to seeing the implementation of the 5-year strategic plan so that as PNG celebrates its 50th anniversary as a country in several years, IRC would have matured into a dynamic organisation carrying forward the country through the revenue it collects. “We want our country to be bigger and better in terms of Education, Health, Law & Order, Infrastructure, and Economy. These five things we want to focus on. I look forward to supporting you as we deliver these.” He said in delivering the corporate plan, IRC must endeavor to abide by these three rules – firmness (corporate and individual citizens to abide by the laws), fairness (all taxpaying citizens to be treated with fairness), and friendliness (tax-collecting business to be handled in a cordial atmosphere). “I look forward to the time when IRC will bring those in the black economy into the formal economy to ensure that we all pay our fair share of dues. “We must all work to leave behind a legacy in our country. Appreciate your place and the job you have today. Look at what you must do, for your country in the big picture. There is no one else placed to make your country better but you. "You will deliver in 2023, you will deliver in 2024; I look forward to the time when IRC becomes a robust organisation that collects all revenue required by law,” said PM Marape. The Prime Minister said regarding housing for IRC staff, his government is currently setting aside K10 million for an housing program that would assist government workers to own a house. This is to assist with job security, so IRC staff concentrate on doing a good job in delivering the organisation’s plans and making more money for the country.

Prime Minister James Marape recently stated that the Country has over K12 Billion in Foreign Reserves sitting in the Bank of Papua New Guinea which is the highest Foreign Reserve for the country ever. Marape said this is the Fiscal Policy intervention that the Government is concerned with and the power to make interventions on foreign exchange remains with the Central Bank. This comes to light after Deputy Opposition Leader Douglas Toumeriesa had recently reiterated calls by businesses and corporate entities within the private sector that the government has not done enough to address the foreign exchange shortage in the country. Toumeriesa added that the Government cannot continue to blame the Russian-Ukraine War for the country's economic setbacks and warned that 70 percent of tax on the forest industry will worsen the shortage in foreign exchange. In response to these statements on foreign reserves, PM Marape said as a government they have done their part in terms of fiscal policy, and it is now up to the Central Bank to intervene as it is an independent body. "The governments concern is in our Fiscal Policy and interventions that have been made in our economy has seen the increase in foreign reserves in the Central Bank which is also the highest ever foreign reserves that our country has ever experienced". "We have over K12 billion sitting at the Central Bank as reserves and the equivalent of that is held as US Dollars for the Central Bank to make interventions on the market". "The Governments Fiscal Policy Interventions have ensured that we have reached this mark in terms of our reserves. It is now up to the Central Bank to ensure that initiatives to reach foreign exchange demands in the market are in place as it is an independent body from the control of the executive Government. That is how our law is stated and I cannot change this structure," PM Marape said. The Prime Minister also called on the Governor of the Central Bank to work with the commercial banks to allow the regular supply of the trading currency which is the US Dollar to be made regularly available to the market.

Photo: PM Marape Prime Minister Hon. James Marape has welcomed the decision by Bank of Papua New Guinea (BPNG) to issue a provisional license to the Teacher’s Savings and Loans Society (TISA) to set up a fully-fledged commercial banking operation in PNG. “We would like a local bank with share offering to ordinary Papua New Guineans, mothers and fathers and to our grassroot population to be set up as soon as possible,” he said. “We need truly Papua New Guinean banks which are owned by our people and are committed to better serve our people. “I await with keen eagerness to see the Teachers Savings and Loan Society formally obtaining a full banking license to commence operations subject to it meeting all the prudential requirements of the BPNG.” PM Marape said the National Development Bank (NDB) Group was also working on a proposal to obtain a commercial banking license from BPNG. “However, they will have to meet the prudential requirements of BPNG to do so, and that could well mean they must partner a major commercial bank to give confidence to BPNG that they will run independently of Government and any adverse political influence,” he said. “The success of BSP is a good shining example of the success of public-private partnership in the banking sector and we cannot go wrong if NDB follows the same model. “I also want to see ordinary Papua New Guineans buy shares in the establishment of such commercial banks.”

Prime Minister, Hon. James Marape met with the officials from the Bank of China on Wednesday, December 21, 2022, and welcomed their plans to extend their Representative Office license which they obtained from the Bank of Papua New Guinea (BPNG). PM Marape has also encouraged the Bank of China to apply for a full commercial banking license from BPNG to set up and operate a full banking network in PNG. The Bank of China operates in 60 countries around the world and is the world’s fourth biggest banking group. It has a diverse portfolio of investments which also includes investments in airline companies. “It will be a very significant boost to have such a high-profile and highly-respected global banking group enter the PNG market to not only serve PNG, but also the South Pacific Region with Port Moresby as its regional headquarters,” PM Marape said, “My Government is keen to see more new banks enter the PNG market to increase competition, to help reduce interest rates, banking fees, expand services to unreached areas using various e-banking platforms, and also to reduce the long queues in all our banks today. “It will also create thousands of new jobs which our country badly needs. “While our Government supports and welcomes the Bank of China to apply for a commercial banking license from BPNG, they will have to apply for it from the BPNG and meet the prudential standards set by BPNG which is clearly laid out in their website. “BPNG is independent and cannot be directed by the Government on its licensing and regulatory functions.” PM Marape said the entry of Bank of China into PNG would also enhance the Government’s plans to strengthen and deepen the trade and investment relationship between China and PNG. “The feasibility study and negotiations leading to a Free Trade Agreement with China is set to start next year with the Chinese Government to fund the study at the cost of K1 million,” he said. “Our Government will also set up a Trade Mission next year in Shanghai to be headed by a Trade Commissioner – whose focus will be to secure more foreign direct investments from China into PNG and secure more Chinese markets for our goods, including our LNG gas and agriculture, fisheries, marine, and forestry products. “China with a population of over a billion people is a very big market that is ready to accept more PNG products. “Amongst our highest trade priorities is the immediate arrangements for direct flights from Shanghai to Port Moresby. Our Government is looking for a Chinese Airline that can service the route under a Code Share arrangement with our national airline, Air Niugini. Our Government is excited about the plans of the Bank of China to open up operations in the country as it will be a big vote of confidence in PNG as an investment destination and also of my Government’s economic management of the country.”

Following the government's Budget 2023 proposal to hike corporation tax from 30% to 45%, Kina Bank is abandoning all of its plans to grow by opening additional offices nationally. Greg Pawson, the chief executive of Kina, stated that the bank was against any rise in corporate tax on the banking industry. “To put into perspective, it is an additional tax of K40 million for Kina based on our 2023 forecast. That is a 50 per cent increase and K40 million that we will now be forced to not invest in future growth. The additional tax is a disincentive for us to invest and grow,” he said. “The unintended consequences of such a move will be detrimental to the banking sector in Papua New Guinea (PNG) which is already structurally imbalanced,” Pawson added. Pawson also announced the suspension of its small-to-medium business and home loan concession interest rate programs. “We will be forced to reassess our capital expenditure programmes and likely cut investment,” he said. “Crazy stuff and typical of recent policy developments, it will be the average Papua New Guineans who will be impacted.” The first bank to respond adversely to Treasurer Ian Ling-Budget Stuckey's 2023 is Kina. The tax hike is anticipated to cause commercial banks to boost interest rates and fees, making PNG the second-highest tax system in the world. Ling-Stuckey announced the beginning of this tax during a business budget breakfast in Port Moresby. “This is expected to raise K240 million (for the Government) to fund vital core services. We will consult the banking industry in the first half of next year, and consider if a different type of tax, such as an additional profits tax, may be more appropriate from 2024 onwards, while still raising the required revenues,” he said. According to Ling-Stuckey, taxing banks was a good idea. “Government needs to continue to raise revenue. We might introduce some new taxes to the sector (banking), that might in the best place to afford paying tax,” he said.   Reference: Esila, Peter. The National (1 December 2022). “Kina shelves expansion plans”. 

Additional company tax on the banking sector will increase from 30 to 45 percent treasurer Ian Ling-Stuckey said when presenting the 2023 budget in parliament recently. This is expected to raise K240 million in 2023 to fund core vital services. The additional company tax was initially imposed on companies declaring huge profits such as BSP and Digicel PNG LTD, for 2023 the government will repeal the tax by replacing it with a imposed increase in company tax for all commercial banks from 30 to 45 percent, according to the Treasurer the government is taking several different measures to increase revenue collection for the country and the company tax is one way that the government is expected to raise K240 million in revenue next year to fund key priority areas. "Following consultations, we have decided to change the form of the tax introduced on the banking sector in 2022, From the 1st of January 2023, the rate of company tax payable by commercial banks will increase from 30 to 45 percent, this is expected to raise K240 million in 2023 funding vital core services. We will consult closely with the banking industry for the first half of next year and consider if a different type of tax such as an additional profits tax may be more appropriate from 2024 onwards." The treasurer said this is part of the government’s efforts to reduce deficits and make way for a budget surplus by the year 2027. In relation the government will also be urging all state owned enterprises to payer higher dividends as well in order to help reduce the country's debts. Meanwhile, Bank South Pacific Financial Group Limited has assured the public that there would be no increase in its service fees CEO Robbin Fleming gave the assurance to the public after the treasurer announced the increase on additional company tax on the banking sector.

The Papua New Guinea Trade Union Congress (PNGTUC) and its affiliated unions have supported the points that were raised by the Minister for international Trade and Investment, Hon Richard Maru on the urgency to investigate companies and businesses that have been operating on loss every financial year. PNGTUC Secretary, Mr Clemence Kanau said no sane person or rather a Government will condone such businesses to conduct their business while declaring nil profit to avoid paying taxes. “Where is the logic of doing business continuously whilst incurring nil profit”? He questioned. He urged the Government to immediately investigate these businesses that have been deliberately evading and bypassing our tax laws. “This matter is a very serious crime in other countries where offenders are slapped with fines or banned from doing business again. If businesses are paying due taxes on time, these taxes will be used by the Government to invest in education, Health, Law and order and most importantly it would create more employment opportunities for citizens”. Mr Kanau said He said the workers throughout the country are currently paying K4 billion in taxes annually while the country’s  extractive industries pays a mere K2 billion  when earning billions more  in profit. This shows a huge disparity. “The major oil palm companies are classical examples of those companies that evade tax. They have never paid any taxes to date while still in business but they continue to declare nil profit annually”. “The extractive industries such as mining, logging companies etc are multibillion kina industries, they obviously earn billions but they are only a minimal taxpayer in comparison to the business they operate”. Mr Kanau said. “It is a glaring disparity between our workers and businesses , where the workers are taxed through their salaries and wages automatically whilst these so called businesses keep bypassing the law by declaring nil profit to avoid paying tax” He said He added that the law must be strengthened to investigate and impose severe penalties to such businesses.

The Minister for state enterprises, William duma has announced the approval that there will be a new commercial bank to be established in the country next year, He stated this when responding to the NCD Governor, Powes Parkop regarding banking related issues in the country in parliament recently. Minister Duma stated that the Marape-Rosso Government has decided to apply for and establish another commercial bank in the country; he explained that when taking into consideration and comparison with other countries such as Fiji and that they have more than 8 commercial banks. “In a country of more than 10 million people we need more commercial banks because if you consider current commercial banks like Westpac and ANZ, they have not been quite keen in expanding their presence and services to other parts of the country”, Minister Duma said. “We must be considerate of our people and take into account that we have a lot of people in remote areas and such it is incumbent upon us as leaders to establish another commercial bank”. “Major commercial banks such as BSP have not been able to provide the services that our people need, many of our people are unbanked due to BSP’s conduct in charging and setting a lot of fees”. Minister Duma said. Minister Duma further said that it is the responsibility of the National Government to set another commercial bank in the country. “I can announce that cabinet has already approved in principle for a new commercial bank to be established and be called The National Banking Corporation”, Minister Duma announced. Minister Duma concluded that under the leadership of our Prime Minister all necessary requirements have been completed and we are now 85 per cent through in reaching that goal, and before the end of next year this country should have a fully fledged commercial bank.

Photo credit: Pixabay The amount of gross foreign exchange reserves at the end of June this year, according to acting Bank of Papua New Guinea governor Benny Popoitai, was US$3.2 billion (about K11.6 billion). At the end of December of last year, there were US$3.2 billion (about K11.3 billion) available. In the bank's March 2022 Quarterly Economic Bulletin, Popoitai stated that this was enough to fund non-mineral imports for 16.3 months. Gross foreign exchange reserves climbed to US$3.3 billion (approximately K11.6 billion) as of September 30 as a result of high mineral and petroleum taxes, mostly owing to tax collections from liquefied natural gas (LNG). “The outbreak of the Russia-Ukraine war in February started to impact the global economy and raised concerns of a slowdown,” Popoitai said. The supply disruptions on oil and gas, and food (wheat) have resulted in high international commodity prices and inflation, hence affecting domestic prices and activity. “The higher prices and production of export commodities have resulted in a significant increase in export receipts and a higher surplus in the current account balance. “The exchange rate remained stable against the US dollar but appreciated against other major currencies. “Data from the Bank’s business liaison survey show that the total nominal value of sales in the formal private sector increased by 7.6 per cent in the March quarter of 2022, compared to an increase of 19.1 per cent in the December quarter of 2021. “The weighted average kina price of Papua New Guinea’s exports, excluding LNG, increased by 38.9 percent in the March quarter of 2022, from the corresponding quarter of 2021 reflecting higher international commodity prices. “There was an increase of 17.7 percent in the weighted average kina price of mineral exports, accounted for by higher kina prices of all mineral commodities, except copper.”   Reference: The National (13 October 2022). “Foreign reserves at K11.6 billion, says Bank of PNG governor”. 

PNGX, Papua New Guinea’s national stock exchange, has received the Securities Commission’s approval of the new PNGX Debt Market Rules. The new PNGX Debt Market Rules allow a company to issue corporate bonds and have those bonds listed on PNGX where they can be traded. Corporate bonds are a type of debt security issued by a company. The company may be listed on PNGX, it may be privately owned, or it may be a State Owned Enterprise (“SOE”). Initially, bonds traded on PNGX will be limited to wholesale corporate bonds. Retail investors will not be able to invest in wholesale corporate bonds within the first year. This is to allow the market to become familiar with the products before opening it up to the retail sector. “Receipt of Securities Commission approval is very exciting for PNGX” said PNGX Chairman, Mr David Lawrence. “It is part of our ongoing commitment to develop the PNGX capital markets, provide companies with new ways of raising funding and providing Papua New Guinean investors with new investment opportunities” he said. “We are in early discussions with some potential issuers of wholesale corporate bonds. We are hopeful that we can bring at least one of them to the market soon” said Ms Elizabeth Wamsa, PNGX General Manager. “We will be publishing materials explaining this new market to both investors and companies in coming weeks” she said. As the wholesale corporate bond market is very different in its nature to the existing equities market, unlike listing on the equities market where a large number of holders are required, only one holder of a corporate bond is required for listing. Investors eligible to invest in wholesale corporate bonds include: a holder of a capital market licence;  a licensed financial institution as defined in the Banks and Financial Institutions Act, 2000;  an insurance company registered under the Insurance Act, 1995;  a superannuation fund authorised under the Superannuation (General Provisions) Act, 2000;   a unit trust scheme or a managed investment scheme; a body corporate that has net assets of at least K10 million as set out in its most recent audited annual financial statements;  an individual where the minimum amount payable for the securities on acceptance of the offer by the person to whom the offer is made is at least K250,000;  a land group incorporated under the Land Groups Incorporation Act, 1974;  a church group incorporated and existing under an Act of PNG;   any other types of investor specified by the Securities Commission. A healthy bond market brings a number of benefits to Papua New Guinea. It provides an alternative funding source for government and companies and reduced dependence on banks and secured loans. It improves access by companies to fixed-price, longer-term credit which allows companies to fund projects which have solid potential for growth and job creation, but which may find it hard to find bank funding. The ability to issue bonds with terms of up to 20 or 30 years can be attractive for funding infrastructure projects. The ability to readily issue longer term bonds also allows banks to offer longer-term loans and mortgages. From an investor’s perspective, they are able to diversify their investments to reduce both the capital risks and the volatility of returns.   PNGX has also received formal notification of approval and pending gazettal of Orders under the Capital Market Act 2015 by the Securities Commission relating to facilitating issuance of corporate bonds to wholesale investors. PNGX is awaiting approval by the new Minister for International Trade and Investment of the second set of orders which will allow PNGX to bring the new Debt Market Rules into effect for the wholesale corporate bond market.   PNGX has previously announced that it has entered into a Memorandum of Understanding with XBourse and Pacific Capital Markets Development to work together to explore the phased development of state-of-the-art digital market infrastructure and services for multicurrency post-trade settlement and registration solutions for public and private markets, including bonds.     Article courtesy of PNGX