Foreign exchange reserves drop by K1.3 billion: ADB reports
FOREIGN exchange reserves dropped by US$400 million (K1.3bil) in about six months from December last year according to the Asian Development Bank Outlook’s 2019 report.
Foreign exchange reserves fell from a US$2.3.billion (K7.82b) in Dec 2018 to US$1.9 billion (K6.46bil) in May 2019 as the Bank of Papua New Guinea injected foreign currency into banks for distribution to private enterprises.
According to the Asian Development Bank Outlook report 2019, the government has revised its budget deficit forecast for 2019 from the equivalent of 2.1 per cent of GDP (gross domestic product), as targeted under its medium term fiscal strategy, to 2.7 per cent, as outlined in its economic mid-year and fiscal outlook.
Expenditure tracked above target in the first six months as utility and rental arrears were carried over from 2018 and as the public sector wage bill continued to grow.
Further, the revenue trend in the first six months of the year was weaker than expected as tax collection fell short of its target, partly because of less buoyant economic conditions.
The Government plans to cut the 2019 capital expenditure budget to meet its revised fiscal deficit target.
A number of external financing sources are under consideration to finance the fiscal deficit.