BOP deficit at K1.2bil

 PAPUA New Guinea’s balance of payments (BOP) recorded an overall deficit of K1.26 billion for the nine months to September, compared with a deficit of K868 million in the corresponding period last year, Bank of PNG governor Loi Bakani (right) said. 

BOP is a statement that summarises an economy’s transactions with the rest of the world for a specified time period. 

The BOP, also known as balance of international payments, encompassed all transactions between a country’s residents and its non-residents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. 

In the September 2013 Quarterly Economic Bulletin (QEB) overview, Bakani said a deficit in the current account, more than offset a surplus in the capital and financial account. 

He said deficit in the current account was attributed to a lower trade surplus and higher net service payments. 

“The surplus in capital and financial account was mainly due to inflows from capital transfers and other investments, which more than offset higher net outflows from portfolio investments.” 

Bakani said level of gross foreign exchange reserves at the end of September this year was K7.24 billion (US$3 billion), sufficient for 8.4 months of total and 13 months of non-mineral import cover.

Bakani said the bank maintained a neutral stance of monetary policy by keeping kina facility rate unchanged at 6.25% over the September quarter of 2013, following low inflation outcomes in the first two quarters of 2013.

He said domestic interest rates moved upwards between the end of June and September 2013. 

“The bank continued to utilise its open market operation (OMO) instruments in conduct of monetary policy in September quarter of 2013”. 

Bakani said there was a net retirement totalling K466.2 million in central bank bills during the quarter. 

“The government also made a net retirement of K120.5 million in treasury bills while issuing a total of K266 million of inscribed stock during the quarter. 

“The cash reserve requirement for commercial banks was maintained at 8% in the September quarter, 2013.”

Meanwhile, Bakani said the average level of broad money supply increased by 2.4% in September quarter this year, compared with an increase of 4.1% in the June quarter. 

“This was mainly influenced by an increase in average net claims on central government as a result of increased issuances of securities and drawdown of government deposits, combined with an increase of 4.7% in average credit to private sector. 

“Average net domestic claims outstanding, excluding net claims on the central government, increased by 3.1% in the September quarter, following an increase of 3.8% in the June quarter.”