By Gedion Timothy
FOREIGN exchange inflows in August picked up following a slump in July, according to the Bank of South Pacific.
Group chief executive officer Robin Fleming, pictured, said the increase last month was due to a combination of commercial market activity.
Fleming told The National there was also “a more substantiative intervention from the Bank of Papua New Guinea with larger importers benefiting from the BPNG support”.
“Foreign exchange inflows in July were somewhat lower, however August saw larger inflows from a combination of commercial market activity and a more substantive Bank of PNG intervention with larger importers benefiting from the support,” Fleming said.
He said the resumption of mining at Ok Tedi in March had contributed to more regular inflows to the market, plus “a better coffee and cocoa season”.
“Export receipts from the agriculture sector are starting to trend down as their respective commodity seasons taper off. But there are some encouraging signs of some later season activity,” he said.
“Import demand though does remain high with retailers and wholesalers ordering goods in anticipation of the peak Christmas/New Year trading period.
“As a consequence, there has been a gradual build-up of import orders associated with seasonal stock purchases.
“There remains an expectation that inflows (forex) will be stronger in the last quarter of 2016 with the prospect of the key LNG (liquefied natural gas) project related flows in 2017 starting to bring confidence for local businesses for the medium to longer term horizon.”
He said BPNG continued to adopt a measured and judicious strategy for currency support.
Attempts to get updates from BPNG on how a government loan of US$500 million (K1559.7m) from Credit Suisse (in June this year) is easing the forex shortage had been unsuccessful over the past two weeks
But it is understood that US$200 million (K623.9m) was brought in early last month followed by another US$80 million (K249.6m).
The National understands any remainder of this facility (Credit Suisse) will be brought in as and when the BPNG feels it is needed.
Government sources said Credit Suisse, and the resumption of the Ok Tedi Mine, was ameliorating the foreign exchange situation considerably.
Treasury Minister Patrick Pruaitch in June had announced that the Department of Treasury and BPNG, on behalf of the State, have successfully negotiated into an unsecured syndicate loan arranged by a leading international financial institution, Credit Suisse AG.
Pruaitch said advise have been sought from BPNG, State Solicitors Office and law firms Gadens and Ashurst, to ensure that all legal requirements have been complied with and due process followed. “The budget for 2016, passed by Parliament expressly provides (both as a source of revenue and the debt service as an expendable) for a sovereign financing of approximately US$1 billion (K3b) to be provided by or raised from offshore investors,” he said.
By Gedion Timothy