Balanced Foreign Curreny Market Still Way Off
Any hopes of a balanced foreign currency market is still some way off as the country continues its foreign currency woes that the significant backlog in orders will still follow through into 2020.
The ANZ research’s latest December report indicated that while the backlog has declined since the highs of 2017, the current amount of K1.4 billion still remains considerable.
“The stock of outstanding foreign currency payments, albeit declining, is still significant at PGK1.4bn. “The recent US$300m loan from Australia will allow the Central Bank to provide more US dollars to the market, further lowering the overdue import invoices, but this won’t be enough,” the report stated.
In its September monetary policy statement, Bank of PNG stated that as of August the backlog was at K1.2bn, down from K1.9bn a year ago.
But the figure K1.4bn for December stated in the ANZ report indicates how much the backlog is creeping up. The ADB in its PNG in review presentation last week gave its predictions that by the end of December backlog in orders will be at K1.6bn, just K100m shy of the highs of K1.7bn in late 2017.
A case BPNG maintained that despite the improvement in inflow, demand currently outstrips supply.
The ANZ thus, maintained that flows associated with works on new gas discoveries will be substantial and present the best chance of returning the FX market to normalcy.
“So, the longer these projects take to start, the longer the FX market will be under-supplied.
A structural shift to a lower currency is an option for re-balancing the market, but the Central Bank seems reluctant to do this, given the inflationary impact associated with a faster depreciating currency,” ANZ pointed out.
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