PNG Central Banks urges government not to spend on new projects,Foreign exchnage rate down by 9.3 percent
Bakani said the Government should maintain spending on existing project developments such as those related to 2015 Pacific Games.
He said this was because the inflation rate would increase because of increased economic activities, and revenue expected for this year would be low.
Bakani said it was important for the Government to make adjustments to this year’s budget and maintain funding for projects that it had started on.
The projected inflation this year would about 6 per cent, he said when delivering the BPNG March monetary policy statement.
“Unlike in the past leading up to 2013, last year we saw some increase of inflation pressure in PNG,” he said.
“It provides another challenge which is consistent with the high economic growth; you expect some pressure in the economy in terms of high inflation picking up in prices.
“That makes financing of the budget this year, quite a challenge, given that revenue will be down this year.
“So the financing of the budget and the adjustment to the budget will be an ongoing challenge for the government and it’s positive that the government made some announcements in terms of starting to monitor the budget outcomes and the expectation of the budget this year to see whether the possible adjustment can be made.
“The prime minister and the treasurer had come out and openly said that they will do that this year.
“Our (BPNG) advice to the Government is to maintain the existing projects, the big ticket items and not to facilitate some of the new ones this year so that we can complete those ones that we have started, particularly the Pacific Games infrastructure and other health and education expenditures,” Bakani said.
“Ongoing coordination between ourselves and Treasury (Department) in ensuring that the national budget for this year go as planned … the big priority areas be considered ongoing for the budget.”
Meanwhile, the foreign exchange rate has depreciated by 9.3 per cent since Bank of PNG (BPNG) introduced the trading band last June.
“Since we introduced the trading band last year, it (foreign exchange rate) has depreciated by 9.3 per cent,” Bakani said.
“Again, this is a reflection of high economic growth that we experienced and that led to high import demand and of course, on the other side, low foreign exchange inflows.”
Bakani said the central bank had intervened in the foreign exchange market with US$570.9 million (K1.48 billion) during the past year given the shortage of foreign currency in the market.
“This is one of the areas (shortage of foreign currency) that we see quite a concerning to us that’s why we’ve taken measures last June on the trading band and this year again on the March 5 on the directives.”
BPNG noted the imbalance had continued and was worsened by foreign banks conducting unauthorised banking business in the country.
He said the measure the bank was taking with issuing of Directives on March 5 this year, was done so to maintain liquidity in the foreign exchange market
“In March this year we intervened quite heavily in the market to help the market meet some of the overdue import demands or foreign exchange demands for the foreign exchange market but there is a
underlying debt logs we are working together with the banks to resolve,” Bakani said.
He added that people found to be breaching the directives issued by the bank, following an audit to be carried out, would face penalties as a result.
PNG Today/PacNews/The National
Post a Comment