Optimism over FX

THE Government has indicated in its budget that foreign exchange (FX) availability will improve next year, says Bank South Pacific (BSP) chief executive Robin Fleming.
Fleming said, if as suggested, the additional foreign exchange would be sourced from loan partners such as Australia and this would in all likelihood see a commensurate reduction in domestic liquidity.
“Apart from the flow on effects for gross domestic product (GDP) and business confidence, this is why projects such as the next LNG projects or Wafi-Golpu are important as the foreign investment introduces capital to Papua New Guinea that does not dilute domestic liquidity,” he said.
Fleming also noted that BSP was cautiously optimistic that an agreement would be reached between the Government and project operators and developers of the P’nyang LNG expansion, and that the Papua LNG would progress.
“These projects are important to economic growth in the medium to long term and will afford the Government the financial capability to implement its policies for the improvement of small to medium enterprises (SMEs), agriculture and equally important, health and education delivery,” he said.
“Absent on those agreements and there will be a need to readjust expenditure commitments to allow for lower growth rates.
“BSP notes that the Government is considering an additional bank profit tax in 2020 and we repeat our view that this is a tax on our shareholders not the business. BSP is the only predominantly PNG-owned bank with almost 90 per cent of shareholding owned by Papua New Guineans and with the three superannuation funds, Nambawan Super Ltd, National Superannuation Fund and Comrade Trustees in total owning 24 per cent of BSP with the returns to those funds and all workers in PNG reducing by any increase in tax.”