With a focus on infrastructure development and a rising middle-class market, including Small and Medium Enterprises (SMEs), Papua New Guinea presents a promising landscape for investors.
PNG’s abundant natural resources in mining, oil and gas, forestry, fisheries, and agriculture further enhance its appeal. From coffee and cocoa to vanilla and local produce for imports, the country's diverse agricultural sector adds depth to its economic profile.
However, amidst this potential, discussions around the fluctuation of the PNG Kina have been prevalent. Prime Minister Hon. James Marape acknowledges this concern and assures that the Department of Treasury and Central Bank are diligently monitoring the situation to prevent any extraordinary inflation.
This was his response to a report by ANZ Bank foreign exchange insight researchers, economists Kishti Sen and Tom Kenny, published in the media on 7th May, on the depreciation of the Kina since May 2023.
He attributes the Kina's depreciation to its artificial pegging in 2014, a measure taken to maintain its value, which ultimately became unsustainable. With the peg now removed, the government is keen on ensuring a stable currency value aligned with market dynamics.
PM Marape said, “The Kina was artificially pegged in 2014, probably with good intentions to maintain its value. But, over time, it became a demotivation for importers to bring back their export earnings as the Kina became more expensive and not on its fair market value.
“We have now unpegged it, and Treasury and Central Bank are observing closely to ensure the depreciation of the Kina does not trigger extraordinary inflation over our 2024 inflation focus. If it does, we will intervene.”
Prime Minister Marape emphasizes the importance of encouraging exporters to repatriate their earnings, thereby supporting the Kina's value.
By collaborating with entities across agriculture, fisheries, forestry, mining, and petroleum sectors, the government aims to facilitate a conducive environment for economic growth and to streamline processes for investors, particularly in US Dollar accounts and funds.
“A lower Kina means more for these people when they bring in their dollars. This will assist push the Kina upwards purely on market value.”
“Last year, we made well over K60 billion in exports, but the return to our economy was much less. If all our exporters brought back to PNG a major portion of earnings, if not all, then the Kina will appreciate.”
“We are working on tidying this, and Central Bank has been asked to look at ease of investors holding US Dollar accounts and for ease of them accessing their own funds.”
The Marape government's agenda revolves around stimulating large-scale investments and trade, with a strategic focus on reducing dependency on imports through increased manufacturing and downstream processing.
Ongoing reforms target high debt levels, while Foreign Direct Investment (FDI) in natural resources promises to revive the economy for years to come.
Acknowledging the contributions of key partners such as Barrick Gold and ongoing projects by major players like ExxonMobil, TotalEnergies, and Santos, the government remains committed to fostering an environment conducive to investment.
“On that note, I want to appreciate Barrick Gold – our partners in New Porgera – for their commitment to remit a minimum of 51 percent of earnings from Porgera,” said PM Marape.
The Prime Minister said Government has been working with investors to bring in capital from Foreign Direct Investment in both exploration and construction, while work is continuing to get the next mining and gas projects up and running.
“ExxonMobil, TotalEnergies and Santos each have over $100 million exploration programs running this year; they will also maintain spending in pre-Papua LNG FID.”
Projects such as the Pasca condensate project and the Wafi-Golpu mine underscore PNG's potential as a significant player in the market.
“We progressing the small Pasca condensate project that would be 50 percent owned by MRDC for Gulf and 50 percent owned by investors. By this year SML for Wafi-Golpu should be issued to kick start construction.”
“All these FDI are for this year and next year, as we head to meet the big construction of Papua LNG, and later P’nyang LNG and Wafi Golpu mine,” he said, adding that PNG’s agriculture, forestry and fisheries exports have been steadily improving which would assist boost the Kina.
He said if any urgent needs arose out of this current situation, Government would make interventions to families, businesses and investors, as it has continuously done over the last couple of years.
“Our government is on record for giving the biggest relief assistance to support the economy and our people’s livelihoods in re-moving taxes for certain work bracket and paying more in school fees. We will continue to intervene.”
The Prime Minister said for the long-term address of foreign exchange and other structural issues in the PNG economy, allowing the Kina to float on its own strength was bound to happen.
“I want to assure everyone that we are conscious of the domestic impact of a depreciated Kina, especially its effects on our small, import dependent economy. I do not want the burden of this to be passed onto store shelves to affect our people further, so we are keeping a very close watch,” said Prime Minister Marape.
In addressing structural issues, PM Marape emphasizes the need for a long-term solution, allowing the Kina to float based on its inherent strength.
While mindful of the challenges posed by a depreciated currency, the government remains steadfast in its commitment to supporting businesses and safeguarding livelihoods.
The PNG government's focus on creating a conducive socio-economic environment highlights its dedication to fostering growth. By prioritizing infrastructure development, safety and security measures, regulatory practices, governance, and access to health and education, the Marape government aims to lay the foundation for a resilient and thriving economy.
