Kina under downward pressure

With the declining commodity prices and lower foreign exchange inflows, the kina continues to be under downward pressure, Central Bank Governor Loi Bakani has revealed.

He said the prices for PNG’s export commodities continue to remain low, while crude oil prices have dropped by more than 60 percent since June 2014.

In his Quarterly Economic Bulletin released today, Bakani said the weighted average kina prices of Papua New Guinea exports declined by 18.3 percent in the September quarter and partly resulted in a decline of 26.1 percent in the value of merchandise exports.

“It is projected that commodity prices will remain depressed in 2016 and therefore the Government will have to exercise restraint and prudent management of its Budget to ensure that it will base its spending on actual or realised revenues and available financing.

“The Government’s initiative to raise funds offshore by issuing a sovereign bond in 2016 will assist in providing some relief for foreign exchange liquidity to the market,” says Bakani

He said lower oil and food prices and lack of demand from the emerging and developing economies associated with weak global economic activity is keeping global inflation flat.

With an extended period of low commodity prices, Bakani mentioned that the feed through from lower international fuel and food prices should offset some of the pressures arising from the depreciation of kina.

The Governor urges companies to pass on the benefits of lower prices to consumers.

Meanwhile, the International Monetary Fund (IMF) in its October World Economic Outlook (WEO) reported that growth prospects across different economies remain uneven as a result of continued low commodity prices, increased financial market volatility and weak global demand.

Growth in the emerging market and developing market economies slowed as a result of prolonged low commodity prices and currency depreciations.

As a result of these developments, the IMF revised downwards its 2015 growth forecast to 3.1 percent from its early forecast of 3.3 percent made in July.




Freddy Mou