Surplus at K664m: Kamit

THERE was an overall surplus of K664 million in the balance of payments (BOP) for first-half this year, up K16 million or 2.4%, from K648 million posted during same period last year.
This was the result of a surplus in the capital and financial accounts which more than offset a deficit in the current account, according Bank of PNG (BPNG) quarterly economic bulletin.
The current account recorded a deficit of K361 million in the first six months compared to a surplus of K1.185 billion posted on the same period last year.
BPNG Governor Sir Wilson Kamit said in the bulletin this was the result of a huge lower trade account surplus and net transfer receipts which was more than offset by a deficit in the service and income accounts.
The capital account posted K48 million in net inflow, up 29.7% from same period last year.
“This reflected higher capital transfers by donor agencies for project financing,” he said.
Sir Wilson said the financial account recorded K928 million in net inflow, compared to K635 million in net outflow in first-half last year.
This reflected a higher net inflow from direct investments mainly due to share placements by a resident mineral company to raise capital for ongoing capital and operating expenditure, and investments in financial derivative instruments through hedge arrangements.
 “These more than offset net outflows from portfolio investments reflecting investments in short-term money market instruments and other investments, combined with lower net loan repayment by the Government.”
Net outflow from other investments was due to a build-up in the net foreign assets of the banking system and foreign currency account balances of resident mineral companies.
The level of gross foreign exchange reserves at the end of June was K5.99 billion (US$2.26 billion), enough to cover 10.3 months of total imports and 14.1 months of non-mineral imports.
Lower global prices for most mineral and agricultural export commodities resulted in weighted average kina price (WAKP) of PNG’s exports, which declined 23.2% by June quarter.
There was a 23.6% fall in WAKP of mineral exports, with lower prices for crude oil and copper.
For the agricultural sector, WAKP for forestry and marine product exports dropped 21.5%, due to lower prices of coffee, cocoa, palm oil, copra oil, copra and rubber.