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The Bank of Papua New Guinea says statistical evidence suggests there is enough foreign exchange currency in the country.
The only problem though is a lack of clearing mechanisms to allocate the foreign currency, and the country’s three main banks, ANZ, BSP and Westpac, only deal with their in-house transactions and are not willing to share any surplus.
According to BPNG assistant governor Joe Tere, there was a K13 billion (US$4 billion) turnover from when the LNG shipment of 2014 commenced.
“When we look at the trend, the turnover never dipped below K13b, it tells you that there is enough forex coming into the country,” he said.
“We have had K13b on average for the last five to six years which is adequate to supply the needs then the question, is why this backlog?
“The simple reason is the spot market is not working. We don’t have a clearing mechanism to allocate the forex, so the directives (on the trading margin to 150 basis points) had been put in place to try and encourage the interbank market to work again, so this is the issue.
“We only have three major players, there is no competition. And so each is focusing on it’s own in-house transactions, they are not willing to share any surplus that is coming in their way,” Tere said.
BPNG says the issue at hand is a structural one, in which the spot market is not working resulting in a mismatch between supply and demand.
The bank was clearing the air in light of ongoing concerns by commentators and media reports regarding the ongoing foreign exchange currency shortage.
From the outset, BPNG governor Loi Bakani said while there was still a backlog of orders the situation had improved and should be better in the next two to three years.
He said up until last year, importers had to wait for up to six-weeks or even 10 weeks. This had since been cut back, with the waiting period now just up to one or two weeks.
He said from K1.9 billion (US$594 million) in un-served orders, this had been brought down to K1.5b (US$469 million) and now K700 million (US$219 million).
He attributed this to a backdrop of improved commodity prices for both extractive and non-extractive products.
Further the increase forex being generated particularly by Ok Tedi Mining Limited (OTML) post the El Nino induced drought.
SOURCE: POST COURIER/PACNEWS
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