BPNG monitoring forex

By NATHAN WOTI
THE Bank of Papua New Guinea’s (BPNG) ability to intervene in the foreign exchange (FX) is constrained by the International Monetary Fund (IMF) programme and reforms in the exchange rate regime, an official says.
Acting assistant governor (monitoring and economic policy) Jeffery Yabom said it was beyond BPNG’s control but the bank was monitoring the situation.
Yabom said this during a Certified Practising Accountants (CPA) annual meeting last week in Port Moresby.
He added that the FX market had been running on a life support from BPNG’s foreign exchange intervention.
However, this life support is becoming unsustainable and drastic policy measures need to be undertaken as soon as possible to put the economy back on the path of macroeconomic stability.
“The bank raised its foreign exchange intervention by US$100 million (about K376.6 million) per month since November last year which provided relief while easing demand for foreign exchange,” Yabom said.
“BPNG also made intervention of US$272 million (about K1.2 billion) in May and US$200 million (about K753 million) in October.
“That’s apart from the US$100 million per month to clear outstanding orders.
“The bank reserves is limited to US$2.6 billion (about K9.7 billion).
“The current reserve is at US$3.7 billion (about K13.8 billion), which means that we have US$1.1 billion (about K4.1 billion) for interventions.” He added that the main issue was a structural problem which could be addressed through Government policy.
He also mentioned that the IMF programme also required several structural reforms, including FX market operations.
Meanwhile, Yabom said that history had showed that the country needed to harness its comparative advantages and invest in the right sectors that would set the course for economic diversification to take place.