|Bank of PNG warns Government. Photo. Bank of Papua New Guinea|
The Bank of Papua New Guinea has warned the Government to manage its budget to ensure it is spent on actual revenues and available financing.
Central Bank Governor Loi Bakani said the declining commodity prices and lower foreign exchange inflows continued to exert pressure on the kina, and the Government should exercise restraint on some of its spending as it was projected that the commodity prices would remain depressed this year.
Bakani said prices for PNG’s export commodities continued to remain low, while crude oil prices had dropped by more than 60 per cent since June 2014.
The weighted average kina prices of Papua New Guinea exports declined by 18.3 per cent in the September quarter, and partly resulted in a decline of 26.1 per cent in the value of merchandise exports.
Lower oil and food prices and lack of demand from the emerging and developing economies associated with weak global economic activity was keeping global inflation flat, Bakani noted in the bank’s 2015 September Quarter Economic Bulletin.
Bakani said the Government’s initiative to raise funds offshore by issuing a sovereign bond in 2016 would assist in providing some relief for foreign exchange liquidity to the market.
He said with an extended period of low commodity prices, the feed through from lower international fuel and food prices should offset some of the pressures arising from the depreciation of kina.
He urged firms to pass on the benefits of lower prices to consumers.