Forex supply positive says BSP
Foreign exchange supply for June and July was positive due to a combination of larger inflows from the mining sector and ongoing monthly interventions by the Bank of PNG (BPNG), according to the Bank South Pacific (BSP).
Chief executive officer Robin Fleming said for many smaller to medium-sized importers, this resulted in longer outstanding orders being filled and execution time reduced to around two weeks.
“Larger importers in fuel, communications and food sectors do have to wait longer, but in most cases, those importers would have also seen their orders reduced,” he said
“Most businesses have adapted to the foreign exchange issues over the past few years, and while not ideal, they have been able to refine their approach to dealing with variability in timing to fill a foreign exchange order with assistance of their key suppliers.”
Bank of PNG (BPNG) governor Loi Bakani said in a quarterly economic bulletin released in June that the Central Bank continued its commitment to support the foreign exchange market by providing dollars to prioritise import orders related to the Covid-19 as well as other health related imports of medical drugs and pharmaceutical products.
Bakani also noted in BPNG’s monetary policy statement released in April that foreign exchange inflows improved in 2019 reflecting increased export receipts and external budget financing.
It stated that those inflows, together with Central Bank’s intervention significantly reduced the backlog of foreign exchange orders.
“However, new orders continue to remain high,” Bakani said.
“The inflows also supported the demand for credit by the private sector.
“Projected inflow of external budget financing in 2020, together with additional external support under the economic stimulus package will assist the foreign exchange market.”
Meanwhile, Paradise Foods Ltd chief executive officer James Rice said getting foreign currency was difficult. “We just need to apply and wait,” he said. Rice said due to that situation, the company’s ability to expand and create jobs had slowed because they could not buy capital equipment to expand the business.
City Pharmacy Ltd group managing director Mahesh Patel shared the same sentiments.
“Due to the uncertainty of timing of availability of funds, we lose credibility with suppliers and also some of them are now asking for cash up-front, which puts a lot of strain on our cash flow and working capital.”