Loans contributed to FX inflows

Business

MAJOR inflows into the country’s foreign exchange (FX) reserves were primarily loans from development partners and donor agencies from last year, says Kina Bank.
The bank’s market review noted that a budget support loan from the Australian government last year contributed US$300 million (K1.02bil) to the country’s reserves, while the Asian Development Bank and World Bank contributed US$100 million (K343.2mil) and US$150 million (K514.9mil) respectively.
“At the start of the second quarter, PNG’s FX reserves were sufficient for 9.3 months non-mining import cover and 5.4 month of total import cover,” Bank of PNG (BPNG) Governor Loi Bakani said.
“Total outstanding orders for goods and services imports are K1.3 billion after the first quarter of 2020. The coronavirus pandemic has discouraged international trade and exports.
“Sourcing FX continues to be a major concern for businesses in PNG.
“The newly-secured US$363.6 million (K1.24bil) from the International Monetary Fund (IMF) will provide some FX relief in the meantime.”
Kina noted that BPNG had stated its intention to intervene in the FX market at a pace of US$30-60 million (K102.98mil-K205.97mil) per month, with priority given to FX orders pertaining to the Covid-19 response. The suspension of the Porgera gold mine, and extended negotiations for P’nyang and Wafi-Golpu projects, would adversely affect the reserve balance in the mid to long-term.
Porgera exported US$720 million (K2.47bil) worth of gold last year.
Furthermore, the recent Covid-19 cases in PNG’s largest mining sites had halted production and threatens the flow of FX into the country’s reserves during these challenging economic times.
The bank noted that after gaining strongly in the early days of the pandemic, the US dollar had lost ground against all major currencies.
The fall had precipitated a weakening of the PNG Kina against its major trading partners due to its peg on the US dollar.

One thought on “Loans contributed to FX inflows

  • Wow, we exported K2.4billion worth og Gold from Porgera alone?? How much from the other mines??
    Here we are complaining about our weak economy and we’re letting all that gold go. Can BPNG keep some of gold bullion to strengthen our kina?? Just saying

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