Difficult to access forex: Scovell

By DALE LUMA
THE PNG Manufacturers Council chief executive officer Chey Scovell says accessing foreign exchange currency has become increasingly hard over the past nine months.
Scovell told The National yesterday that the restricted supply had continued to constrain or in some cases, halt operations for businesses.
“I can only concur that many of my members and businesses with whom I associate with have indicated that accessing forex has become increasingly harder over the past nine months,”he said.
“The strengthening Australian dollar concurrent to the continued crawling down of the PGK (Kina) to USD (US dollars) has also exacerbated the situation.
“It’s not more costly to get forex.
“We will continue to see constrained businesses and increased costs.”
Scovell said there had been insufficient or inadequate steps by the State to see export earnings repatriated to PNG.
“For instance, for all the vanilla and coffee we export, can we see all the dollars coming back?” he said.
“These are not like palm oil or fisheries operations with large forex requirements of their own.
“They are commodities grown by small- holders being purchased by middle-parties left right and centre and exported.”
Scovell said the Government needed to get the mines such as Porgera running again although they were not the solution in themselves.
“We need to clamp down on the agriculture exporters and major forex consumers such as Digicel,” he said.
“We need to scrutinise the back-to-back costs.
“While it’s been floated for many years that kina is artificially high and should be lowered, by direction as opposed to market-driven, there is a class of businesses and persons in PNG that are facing a very difficult situation.”
He said they included those with offshore finance and/or operations.
“In addition to not being able to repay the finance, dividends or intra-company loans, as the kina value drops their cost increases or margins disappear,” he said.
“Imagine you had a building contract in 2013 and you purchased US$3 million (K10.82mil) worth of materials to do the job.
“At the time, you had K7.5 million to pay for those goods and you financed most of it as you didn’t get full payment until completion in late 2014. As a business, you contract in a provision for forex, but it would’ve been minor and looking out only 18 months or so.
“Fast forward to 2021, you’re still trying to repay the finance for those goods.
“If you could have all the funds now you’d need more than K11 million, and this alone doesn’t cover any interest accrued.”
Scovell said this was class of business “in dire straits”.
“The outlook suggests that the cost to repay is going to only increase and the ability to remit is getting harder,” he said.
“At what point does a financial advisor or auditor say you need to wind things up?”