Commodity Prices

COVID-19 pandemic affecting commodity prices

Central Bank Governor Loi Bakani said this will affect the revenue for government and foreign exchange inflows into the market and to BPNG.

He said PNG, being a price taker, cannot do much about commodity prices.

Mr Bakani also stressed that even domestic tax and customs revenues will be lower given the slowdown of economic and business activities and an increase in jobs loss.

He explained that the only alternative source is external financing.

Fuel and food prices to rise in 2018

CEO of the Independent Consumer and Competition Commission Paulus Ain confirmed this.

He said this is due to the increase of fuel price which was released recently due to the new tax for fuel as per the 2018 budget.

“That was a government decision.

“So most likely the cost of doing business in this country will be affected because fuel is the main cost driver.

“So if fuel is driving this cost then we are also expecting food prices on the shelf to also increase.

Weakening commodity prices affects 2017 Budget

This has resulted in the Government handing down a 2017 deficit budget of K12.9b on Tuesday.

Treasurer Patrick Pruaitch when handing down the budget said it has been no secret that the country have been facing economic crisis.

“We have been forced by circumstances to tighten our budgetary situation further through Supplementary Budgets in 2015 and 2016.

“In doing so we have maintained a conservative course in terms of fiscal sustainability and will be well placed to capitalise on developments when global economic conditions improve.”

Fall in commodity prices affects economy

However, BSP’s Economic and Market Insight stated that PNG’s GDP is expected to normalised after posting strong growth (8%) over the last decade.

The report stated that the economic growth is expected to be around 4.3%, the ‘new normal’ in 2016 driven by a rebound in the mining and non-mining sectors.

There were some positive developments with OK Tedi Mine (OTML) resuming operations on March 1, after a seven-month stoppage.

Kina under downward pressure

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.