Forex reserves expected to hit K7b

FOREIGN-exchange reserves are expected to be at about US$2.2 billion (K7.1 billion) by the end of the year, according to the Bank of Papua New Guinea Monetary Policy Statement.
“The increase mainly reflects improvement in inflows from mining and petroleum tax, dividends from the State’s share in the mining and petroleum projects, and royalty and development levy from the PNG LNG Project,” it said.
“External financing of the Budget deficit from concessional, commercial and other sources will also contribute to the increase in reserve levels.
“Inflows into the foreign exchange market improved in 2017 following the pickup in prices of some export commodities.
“The Central Bank’s intervention also assisted the foreign exchange market.”
The bank said the private sector was still being impacted by limited availability of foreign exchange based on the latest business survey it conducted.
“The private sector has reiterated concerns about the accessibility to foreign currency and how it is affecting their business operations,” it said.
“They have either scaled down or switched to local suppliers to meet their business needs, which has led to some import substitution.
“In addition, production of agriculture commodities is constrained by high cost of doing business emanating from poor transport infrastructure and accessibility to market.”
The bank said it was unfair that project development agreements for extractive companies allowed them to keep export earnings offshore, especially during the shortage faced in past years.
“A significant share of the export receipts are kept in offshore foreign currency accounts by the mining, gas and oil companies under the provisions of the various project development agreements,” it said.
“This situation is unfortunate given the foreign exchange shortage faced by the country during the last few years.
“Future negotiations of development agreements should avoid such situation from happening.”