Increased foreign currency sees fall in unpaid debts

Increased foreign currency supply in recent weeks has seen outstanding orders (excluding profit repatriation orders yet to be placed) fall to K1.5 billion from K3 billion last September.
According to ANZ’s July economic report, this was a welcome development for the market.
The report said the country’s economy had been weighed down by a shortage of foreign currency since 2013.
Businesses, unable to access foreign currency on a timely basis, had faced cash-flow problems, significantly downsized their business and stalled most new investment plans.
“We anticipate further reductions in outstanding orders over the coming months, driven largely by a depreciation of the currency,” the report said.
“However, we are not convinced a balanced market is imminent.
“That will happen when LNG expansion projects kick-off in late 2019. In the meantime, we would encourage the Central Bank to clear the backlog of orders and put the economy on a more solid footing.
“Meanwhile, economic conditions more broadly remain difficult because domestic demand, in particular mining investment, is soft.”
The report said real GDP growth had slowed to around 2 per cent as PNG LNG’s strong contribution to export growth “is well in the past”.
“However, it is not all doom and gloom,” it said
“The current business operating environment in Papua New Guinea is difficult, whichever way you cut it.
“While scarce foreign currency is impacting supply, the problem lies on the demand side, particularly domestic demand.
“With a few exceptions, notably the mining industry, demand, revenue and profits are weak.
“Businesses will be reluctant to invest and hire people unless domestic demand picks up substantially.
“Hence, formal sector employment, which has been falling over the past three years is likely to remain soft over the short term and weigh on private consumption expenditure.”