Firm: FX continuing problem

Business

FOREIGN exchange shortages will continue to be an impediment to businesses in the country throughout this year, according to Kina Securities Ltd.
According to its 2019 annual report, proceeds of the US$300mil (K1.14bil) budget support funding from the Australian government eased some pressure with further foreign exchange support to come from proceeds of the Government’s planned offshore borrowings.
“Domestic interest rates remain high and are expected to continue in the face of the government’s fiscal funding needs.”
The report further stated that the deadline inflation remained high albeit lower then recent years, while employment intentions and discretionary consumption remained weak.
“Since the end of our financial year, the Covid-19 has catalysed a significant fall in equity markets and some commodity markets globally with oil being the prime impacted commodity. Central banks have acted through a combination of interest rates remaining high and the boosting of quantitative easing programmes.
“A significant global economic slowdown now appears inevitable with the likelihood of recession increasing.
“PNG will to some extent be impacted through its linkages to the global economy which are primarily the resources industry.”
The report added that however, a large part of the economy was internally focused and as a developing country whose population and large segments of business service local consumption, there was a level of activity that would not be impacted to the degree that may happen in a fully open economy.
“We expect the main area of impact will come via supply constraints if global manufacturing capacity, specifically China, remain offline for any extended period of time.”

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