BSP clears Forex backlog

Business

By MARK HAIHUIE
ABOUT K200 million in foreign exchange orders were cleared by the Bank South Pacific in the past two weeks, according to  chief executive Robin Fleming.
Fleming said that the backlog was reduced with the injection of US$80 million (about K256 mil) into the foreign exchange market by the Bank of Papua New Guinea (BPNG).
“BPNG two weeks ago released US$80 million into the market as part of their 100-day plan which came in two specific tranches – one for larger customers who are systemically important in each sector, and the other for smaller companies. And that has seen some of that backlog start to reduce,” Fleming said.
“For BSP, that backlog has been reduced by about K200 million over the last two weeks.
“We understand that there is still further work. The Treasurer is committed to the 100-day plan and he is talking to other multi-laterals as to how they can access some more US dollars.
“And part of that is going to be the release of the final tranche of the Credit Suisse loan of US$75 million.
“On how much more is needed to restore normalcy in foreign exchange availability.”
Fleming said further intervention into the foreign exchange could cause future market imbalance.
“From the BPNG perspective, it is always how much is enough. There are many businesses continuing to import at similar levels two to three years ago notwithstanding some of the foreign exchange issues,” Fleming said.
“I think it would be a good signal of confidence if a similar amount of US$100 to US$200 million was made available.
“But equally, BPNG has got to be cautious about whether releasing that will stimulate more demand and could in fact create future foreign exchange imbalance issues in six to nine months’ time.”
Fleming reemphasized the need to grow the agricultural sector to be better insulated from foreign exchange issues.
“The coffee season this year has been nowhere as strong as previous years, and that has also contributed to some reduced foreign exchange flows.