Forex to improve: BSP

THE foreign exchange liquidity in the country is expected to improve this year although it will remain tight in the first quarter, according to the Bank South Pacific.
Group general manager treasury Rohan George highlighted in the BSP Economic and Market Insight December 2021 quarter publication that the foreign exchange inflows were expected to fall by 13 per cent with the support of the Bank of PNG (forex) intervention and 20 per cent without its forex support, from levels enjoyed in the last quarter of 2020. He forecast that the reduced forex inflows from the Porgera mine shutdown, the effect of the fire at Ok Tedi, Government businesses and State-owned entities strong end-of-year inflows “are likely to be partially offset by increased forex intervention by the Bank of PNG”.
“The Kina is likely to continue its gradual fall against the US Dollar (10bps/month), while persistent Australian dollar strength will see larger falls in the Kina against the Australian dollar cross-rate,” he said.
The high import demand also continues to exert downward pressure on the Kina exchange rate against the US Dollar.
“A look ahead into 2021 is promising,” he said. “For instance, Japan has committed to a K1 billion low interest loan to help finance PNG’s budget deficit.
“Further, the Government has provided assurances regarding multi-billion Kina resource projects like the Wafi-Golpu, Papua LNG, Pasca offshore, and the re-opening of the Porgera mine.
“A successful conclusion of negotiations will provide foreign exchange relief.”