Drop in commodity prices affecting forex, tax revenue: Bank

The latest international commodity price data published by the World Bank last October indicated a general fall in prices of the country’s main export commodities.
According to the Bank of Papua New Guinea’s Quarterly Economic Bulletin for the September quarter 2019, governor Loi Bakani said prices for copper and oil declined while gold prices picked up, reflecting investors’ preference for gold as a safe investment.
“For non-mineral commodities, only cocoa prices increased while coffee, palm oil, logs and tea prices remained weak.”
Bakani expressed concern that lower international commodity prices would continue to affect the country’s export, tax revenue and foreign exchange inflows as the kina is a commodity-based currency.
“This will continue to put pressure on the foreign exchange market as increased Government spending and pick-up on private sector activity would exert more demand for foreign exchange.”
He stressed the importance of the Government’s support for the fishing and agriculture sectors in terms of policy reforms and capital investments to increase production and improve export receipts, as well as encourage import substitution activities to reduce the country’s import dependency.
Bakani noted that economic indicators available to BPNG pointed to a lower growth in business activity in the September quarter of 2019.
“The growth was mainly driven by the mineral sector with higher production and export of mineral commodities.
“However, weak recovery in the global economy and its impact on international commodity prices continue to affect most of PNG’s major exports during the quarter.
“Consequently, most prices and production of agricultural commodities fell affecting foreign exchange inflows.”