Deficit hits K452mil

By MALUM NALU
PAPUA New Guinea’s balance of payments posted an overall deficit of K452 million in the March quarter of this year, compared to a deficit of K187 million in the same quarter of last year,  Bank of PNG Governor Loi Bakani said.
He said in BPNG’s March Quarterly Economic Bulletin that this outcome was due to deficits in both the current and capital and financial accounts.
 “The deficit in the current account was due to higher net service and income payments, which more than offset a trade surplus and net transfer receipts,” Bakani said.
“The deficit in the capital and financial account was due to net outflows from portfolio and financial derivatives reflecting investments in short term money market instruments and financial derivatives, respectively.
“This, combined with the build-up in foreign assets of the commercial banks and a net loan repayment by the Government, resulted in the overall deficit.”
The level of gross foreign exchange reserves at the end of last March, meantime,  was K8.794 billion (US$4.28) billion, sufficient for 10.9 months of total imports  and 16.4 months of non-mineral import covers.
Bakani said BPNG maintained its tight stance of monetary policy by keeping the kina facility rate (KFR) at 7.75% in the March quarter of this year.
To support the tight stance of policy, the cash reserve requirement (CRR) of the commercial banks was increased from 6% to 7% during the quarter, and issued a net K126.9 million in new Central Bank Bills (CBB) to the market.
In other developments:
g    The average level of broad money supply  increased by 3.2%  in the March quarter of this year, compared to an increase of 3.7%  in December quarter of last year;
g    The average level of deposits of the “other depository corporations (ODCs)” increased by 3.9% to K17, 427.4 million in the March quarter of this year from       K16,767.6 million in the December quarter of last year;  and
g    In the March quarter of this year, total domestic credit extended by financial corporations to the private sector, public non-financial corporations, provincial and local level governments, and other financial corporations, increased by K350.6 million to K9.385 billion, compared to an increase of K108.9 million in the December quarter of last year.
Bakani said preliminary estimates of the fiscal operations of the national government over the three months to March this year showed an overall deficit of K76.5 million, compared to a deficit of K77.0 million in the March quarter of last year.
This represented 0.3% of nominal gross domestic product (GDP).