‘Forex supply came from mining’

THE supply of foreign exchange to the domestic market last year was derived mainly from the mining sector while the demand for foreign currency was led by the retail sector, the Bank of PNG says.
Governor Loi Bakani said this trend was expected to continue this year.
He said the kina exchange rate depreciated against the United States and Australian dollars between the end of last September and the middle of March.
“As of March 18, 2021, it depreciated against the US dollar from US$0.2850 (K0.98) reflecting continued high import demand,” he said.
“Against the Australian dollar, the kina depreciated to AU$0.4026 (K1.05) over the same period mainly reflecting cross currency movements with the Australian dollar appreciating against the US dollar.”
Meanwhile, the annual headline inflation, as measured by the consumer protection index and released by the National Census Office (NCO), trended upwards in the second half of 2020 due to the impact of the Covid-19 pandemic on the prices of seasonal produce and medical services.
“Annual headline inflation was around 4.5 per cent in the December quarter of 2020,” he said.
“The annual core measures of inflation also increased.”
“For 2021, the bank forecasts the annual headline inflation to be around 4.5 per cent taking into account the declining feed-through from past inflation and relative stability in the exchange rate.
“The underlying inflation measures are projected to be low.
“The upside risks to these projections would include the impact of disruptions to domestic and external supply chains.
“Over the medium term, the headline inflation forecast is around 4.0 per cent, reflecting the easing of containment.”
Bakani also noted that the Central Bank would work closely with the Government on any new measures to support economic growth.
He said considering the macroeconomic developments last year and projections for this year, the bank would maintain an accommodative stance of monetary policy in the next six months.
“It will closely monitor the developments on inflation and other macroeconomic and financial indicators, and will take necessary measures to ensure macroeconomic stability.”