He further said one of the dailies also ran a misleading headline.
Abel instead says the Government welcomes the report, which confirms that the medium term outlook for the Kina is positive.
In a statement, the Acting Prime Minister said after challenging years there is a rebound in the national economy.
“The Kina has experienced downward pressure since 2014 after the end of the construction phase of the PNG LNG Project and the collapse of the oil price, and that is to be expected in times of economic slowdown, especially in a country that relies heavily on commodity exports.
“The overhang in demand for forex has been reducing over time but is certainly not eliminated yet. The Kina has been stable for some time at around USD .30/Kina and AUD .4/Kina and I think a projected plunge in the Kina by political opportunists and the newspaper is more about making a headline rather than what the ANZ report actually says,” stated the Treasurer.
Minister Abel said, the recent ANZ September report “FX Insight” forecasts that the PNG Kina will strengthen against the dollar reaching 0.38 (from the current 0.30) by 2020.
“This is in line with the Government’s own forecasts which suggest that the Kina will strengthen in the medium term.
“The ANZ July report already picked up that the situation was improving when they noted that… ‘increased foreign currency supply over recent weeks has seen outstanding orders (excluding profit repatriation orders yet to be placed) fall to PGK1.5bn (USD500m) from a peak of PKG3bn (USD1bn) in September 2017’.
“This is a welcome development for the market.
“This year in accordance with the 2018 Budget, the Government has successfully negotiated direct, highly concessional budget support from the ADB and the World Bank, in recognition of significant reforms underway, including a Medium Term Revenue Strategy, as well as completed its program with Credit Suisse. These sources will result in nearly USD 420 million in foreign exchange in 2018.”
“The higher commodity prices, with oil in particular, (OPEC BASKET $77/barrel against $51/barrel in 2018 budget) have also already yielded an additional 500 million Kina in mineral taxation in the first half of the year alone - most of which is also paid in foreign exchange.”
Abel said other key initiatives in the Budget, such as the potential issuance of the inaugural ten year 500 million USD Sovereign Bond (to be used over three years) will help clear the backlog of foreign exchange and strengthen the Kina.
“The Bank of PNG has also been making regular interventions in the market using its reserves.
“The effect on the overall debt portfolio of Government will also mean an overall lengthening of the tenor profile (time to repay) and lowering of the average interest rate due to the concessional loans and as domestic short term debt is paid down it will take pressure off the local market and help lower rates for future domestic issuances.
“Any new long term debt will be at much lower than the 12 percent currently on offer in the domestic bond market. Debt to GDP will be maintained below 35 percent.
“As the July report from the ANZ states, if these funds can bring the market back to balance earlier than anticipated, ‘then the downward pressure applied from a foreign currency shortage will be eliminated. This, in turn, could push the kina higher sooner than forecast’.
“The Government is also working on creating a FDI (Foreign Direct Investment) stream over the next five years with the Papua LNG, PNG LNG expansion project and Wafi Golpu construction phases.
“These will also be under fiscal terms to give earlier revenue flows to Government when production commences compared to the existing PNG LNG Project. This will bring in significant capital and revenue forex flows as well.”
Abel said in around 2024, the PNG LNG Project will be fully paid up and if oil prices can remain above USD60/ barrel, the country will see revenues and forex flows jump significantly from this project at this time.
“Then we also have production starting on the other projects. The real challenge of course is to continue to build that broader, non resource based, less import reliant economy,” said the Treasurer.