Virus impacted investment, economic activity: Bank

PAPUA New Guinea’s domestic environment has seen new macroeconomic challenges that have had broad negative implications for the financial sector and the economy as a whole, according to Kina Bank.
The bank said in its market review that most prominent of these challenges was the coronavirus which impacted investment, economic activity, aggregate demand, and placed a strain on the government’s fiscal and monetary operations.
It said there had been indications of layoffs in hotels and accommodation, and manufacturing, and other sectors were reporting financial difficulty and seeking relief for cash flow and loan servicing.
“The Government has marshalled superfunds, banks, and other financial actors to provide financial relief to members and borrowers during this time,” the bank said.
“These banks and institutions also provided liquidity directly to the Government for its fiscal operations through using the repurchase facility and quantitative easing programme from Bank of PNG.
“The BPNG facilities also allowed superfunds, banks and financial institutions to cash their shorter-dated paper to support members, depositors, and borrows.
This has led to a build-up in cash reserves and a general slow-down in the circulation of money throughout the economy.
“Financial flows into private investment have seen a marked reduction as well during the first half of 2020.
It said the slow-down was symptomatic of the prevailing pessimism brought on by Covid-19 and the cancellation or delay of major national resource projects