Bank South Pacific says forex supply at its disposal is lower compared to the same period last year as there had been a build-up of forex orders in recent months.
Its Chief Executive Officer Robin Fleming says there are a number of factors attributable to the increased forex orders placed by business houses.
“Total outstanding orders with BSP are approximately K60m higher than at the same time last year,” Mr. Fleming told PNG Economics Bulletin today.
He firstly attributed the superior order to the increase in energy prices globally linked to the conflict between Ukraine and Russia. (PNG importers need more forex to buy energy products?.
“Additionally business activity in PNG has also been positive in recent months, some of which is election related and some of which is in anticipation of future extraction industry projects as well as higher agriculture commodity prices stimulating consumer demand, and this also contributes to more demand for foreign exchange as imports increase” he said.
“Notwithstanding the increase in orders most corporate customers other than those with larger payments are having their orders filled within 4 weeks, retail customers with orders under K25,000 generally within a day or so, and other retail customers can expect to be paid within 4 weeks.
The increasing quantum of fuel related orders though is putting pressure on the market as banks such as BSP look to balance the need to provide foreign currency to fuel suppliers against providing current to other corporate and retail customers.
Bank of PNG does intervene in the market on a regular basis and they would continually reviewing the overall supply of foreign exchange across the market. It is expected that higher energy prices will continue to influence the domestic foreign exchange market for at least the remainder of 2022.
Delays in reaching the final steps in the agreements to re-open Porgera mine does contribute to foreign exchange inflow shortages as the Porgera mine had been a good source of foreign exchange to the market.
Low rainfall in Western Province may also contribute to some delays in shipments of concentrate down the Fly River.
Other key resource project decisions will be delayed by virtue of the election due to both investors waiting for an election outcome and government being in a caretaker mode. This is not unusual and is experienced not just in PNG but also in other countries during an election phase,” Fleming said.
