PNG Foreign Exchange Inflows Ease in Q1-24

Foreign exchange (FX) inflows in the PNG market eased in the first quarter of 2024, due to lower Central Bank (BPNG) intervention and exporter inflows.

BSP’s Group General Manager for Treasury & Markets Rohan George said in quarter one of 2024 (Q1-24), FX market turnover fell by 22 percent compared to the final quarter of 2023 (Q4-23).

He explained that outstanding FX orders and order execution times had lengthened in Q1-24 and FX market inflows also dropped by 21.7 percent during the same period.

“Reduced BPNG intervention and FX inflows from exporters over the March quarter saw BSP customers’ outstanding FX orders peak at PGK 785 million and had amounted to PGK 550 million by the end of March” Mr. George added.

He further clarified that State of Emergency and National Interest orders were given priority over all other orders. Additionally, Trade and Service orders were prioritised over Capital payments such as dividends. This prioritisation contributed to longer execution times for orders in Q1-24.

“PGK/USD exchange rate depreciated further under the crawling peg, falling by 1.2 percent to 0.2651 in Q1-24. The PGK is expected to depreciate against the USD by approximately 0.4 percent per month or 5 percent per annum,” he added in regards to the nation’s currency.

The crawling depreciation of the PGK will be reviewed by BPNG and IMF in May.

Mr. George expects FX inflows to reduce as some fuel imports continue being settled in foreign currency offshore. With BPNG unlikely to increase the volume of FX intervention, outstanding FX orders are expected to move back to previous highs experienced in September/October of 2023.

As availability of foreign currency remains volatile and outstanding FX orders are growing, customers are encouraged to place FX orders as quickly as possible, with correct documentation to avoid any unwanted delays.