Papua New Guinea’s Genia rejects calls for devaluation

The acting governor of Papua New Guinea’s central bank has denied any plans to devalue the national currency.

“There has been a lot of speculation recently on a devaluation of the kina,” Elizabeth Genia said, according to a July 10 report in The National.

“While there are grounds for the kina to depreciate in a gradual and in a measured way, any talk of a devaluation is unfounded,” Genia continued.

Treasurer Ian Ling-Stuckey also rejected calls for a devaluation. “This will not happen,” The National quoted him as saying.

In March, the International Monetary Fund granted Papua New Guinea a 38-month funding package worth $918 million. “The real effective exchange rate is overvalued by 13.4% in 2022,” the report on the loan said.

Sohrab Rafiq, the IMF country representative, told the Papua New Guinea Post-Courier: “Resolving FX shortages for good requires tackling the overvaluation by gradually bringing the kina to its market clearing rate, which would enable kina convertibility.”

The kina is strong in part because the Bank of Papua New Guinea works to keep the US dollar/kina exchange rate steady, which means the kina’s value has risen with the dollar’s. The kina has fallen slightly against the US dollar in the last year, by 1.8%. But it has appreciated against the Australian dollar (1.5%) and renminbi (6.1%) over the same period.

As part of the loan package, the country’s authorities committed to increasing the amount of foreign exchange available, “and start on our path to return to kina convertibility”. It did not pledge to devalue the kina.

In January, the national airline was forced to briefly suspend flights after a dispute between the nation’s monopoly fuel importer and the central bank over the former’s foreign exchange dealings.