Firms take advice, shut foreign accounts

 BANK of Papua New Guinea says some companies have closed their offshore foreign accounts following directives issued by the bank in March this year. 

Foreign exchange control directives were issued to ensure a smooth functioning of foreign exchange market to instil order in the 

market. 

Governor Loi Bakani (pictured) issued directives to companies with vostro accounts that were accepting direct kina deposits by PNG residents, which were not permitted by the central bank.

Vostro accounts are usually owned by foreign banks that are doing banking businesses in PNG through their kina accounts held in domestic banks. 

Bakani said other accounts the directives were issued for included offshore foreign currency accounts approved by BPNG and established under project development agreements, and offshore foreign currency accounts approved by BPNG without project development agreements. 

He noted impacts for lower foreign currency in the market would be further drying up of the foreign currency market and depreciating of kina. 

“A few companies have complied and closed some of their unauthorised offshore foreign currency accounts. 

“This followed instructions given to holders of unapproved offshore foreign currency accounts to close them and remit funds to PNG. 

“The Bank is undertaking a verification exercise on remittances of export proceeds by exporters of non-mineral commodities as well. An audit on the opening and operations of domestic foreign currency accounts and vostro accounts, and transactions in these accounts, including transfers, by domestic authorised foreign exchange dealers has started and is continuing,” Bakani said in the BPNG March quarterly economic 

bulletin. 

Meanwhile, the level of gross foreign exchange reserves declined to K5.6 billion as at June 18 this year, from K5.7 billion at end of March this year.

Bakani said the decline was due to intervention by the bank in selling foreign currency to the foreign exchange market, adding that level was sufficient eight months of total and 13 months of non-mineral import covers.