by Theckla Gunga – EM TV, Port Moresby
Bank of Papua New Guinea (BPNG) Governor Loi Bakani clarified that PNG has a floating exchange rate.
His commen’s follow concerns raised by numerous businessmen on the fluctuation of PNG Kina against foreign currencies.
Bakani said though the 2015 budget reflects a deficit, it will not have a direct impact on the Kina value.
“It is not the issue of having enough reserves, it’s about having enough commercial banks in other centres,” said Bakani.
Last week, a number of concerns were raised by parliamentarians on Papua New Guinea’s foreign reserve currency. It was debated whether or not PNG had enough reserves in the central bank.
This morning, BPNG Governor Loi Bakani explained that the concept was misunderstood by both parliamentarians and the public. Bakani said PNG has been using a fixed exchange rate against US dollars since the country’s independence.
However, when the ruling government of 1992 to 1997 took power, PNG recorded a budget deficit. Thus, in 1994, the central bank decided to change the exchange rate from fixed to floating.
However, the Kina value is still depreciating. The current exchange rate is now at .3795 against US dollars – a depreciation of .0335 Toea, while the inflation rate has remained at 5 per cent since 2014.
BPNG will now be advising the government to priorit’se spending where necessary in the hopes of minimising deficit. But the O’Neill-Dion government aims to balance the budget come 2017.