Pressure On Foreign Reserves Due To Low Commodity Prices, Says Bakani
The fall in commodity prices in the non-mineral sector have been attributed as major factors putting pressure on the country’s foreign reserves.
Despite a recent boost in foreign currency inflows, as a result of the drawdown of major loans from Australia and the Asian Development Bank, pressures will still persist as long as major agricultural commodities continue to experience lower prices, amidst increased private sector activity.
The Central Bank of PNG expressed this in its latest September Quarterly Economic Bulletin report released yesterday.
“The latest international commodity price data published by the World Bank in October 2019 indicate a general fall in prices of PNG’s main export commodities.
Prices for copper and oil declined whilst gold prices picked up reflecting investors preference for gold as a safe haven investment.
“For non-mineral commodities, only cocoa prices increased while coffee, palm oil, logs and tea prices remained weak,” Central Bank Governor Loi Bakani expressed concern that lower international commodity prices will continue to affect PNG’s export, tax revenue and foreign exchange inflows as the kina is a commodity-based currency.
“This will continue to put pressure in the foreign exchange market as increased Government spending and pick-up on private sector activity would exert more demand for foreign exchange.
He reiterated the importance of the Government’s support for the fishing and agriculture sectors in terms of policy reforms and capital investments to increase production and improve export receipts, as well as encourage import substitution activities to reduce the country’s import dependency.