Adjustment to forex system can ease backlog issue: Barker

Business

INITIATIVES to reduce the foreign exchange backlog should also consider adjusting the present exchange rate system, Institute of National Affairs executive director Paul Barker says.
Barker told The National that the shortage could take a while to correct and that depends on the Government’s level of engagement with stakeholders.
“The Central Bank’s system of exchange rate management has partly contributed to the situation, together with the underlying balance of payments issue,” Barker said.
“PNG’s balance of trade is positive, but the outflow of funds, and retention of funds offshore, including to repay the capital costs of major resource projects, has restrained the inflow of needed foreign exchange.
“Positive engagement with the International Monetary Fund and other development partners, in combination with firmer and more open commitments to address the country’s economic and fiscal challenges, plus efforts to relieve pressure on forex for oil imports by Puma through the kina-denominated offset arrangement with Oil Search, will hopefully relieve some of the short-term demand and start to relieve the considerable backlog of forex payments due. But it won’t be achievable overnight, until the fundamentals are shifted.”
He said the health sector needed to be prioritised in the current shortage which could take a while to correct.

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