Funds standoff hurting PNG, top central banker warns

The acting governor of the Bank of Papua New Guinea (BPNG), Elizabeth Genia, has told a PNG investment conference in Brisbane the decision of large companies to hold large reserves of earnings offshore was hurting the country's ability to develop.

The PNG government declared a national emergency early this month after one of the nation's biggest fuel suppliers, Puma Energy, warned it was about to begin fuel rationing because of a dispute with BPNG over its financial arrangements and access to foreign exchange.

While the immediate threat to fuel supplies, including for aircraft and vehicles, has eased, in her speech Ms Genia emphasised the need for a long-term solution to the nation's foreign exchange shortage.

"We continue to be concerned about the level of funds held offshore and the impact that has on our access to foreign exchange," Ms Genia said.

"We as a nation want to be able to provide more foreign exchange to our small companies, particularly our small PNG national-led companies that often lose access in preference to big international companies.

"We cannot, any of us, continue the way we have over the last 18 months."

There have been calls for a depreciation of the PNG currency, the kina, to help ease the situation.

Ms Genia acknowledged the problem but said there would be "no devaluation of the kina".

"The rationing of foreign exchange, and its absorption almost completely by the largest of our businesses, cannot continue," the acting BPNG governor said.

"We know our currency is misaligned with market forces, which has led to the rationing."

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Ms Genia said the central bank must "carefully balance" the needs and wants of all stakeholders.

"All have differing costs and benefits when it comes to the value of the currency," she said. "We understand very clearly that a hard, sharp devaluation is in no-one's interest."

Th acting government flagged that any "adjustments" to the currency would be undertaken with care, and said the central bank had worked with the International Monetary Fund to develop a "roadmap to a more flexible exchange rate regime".

"We want our domestic companies to thrive, and for our wealth to be held onshore," she said.

In recent years the largest of the Pacific island nation has become the focus of intense interest for China, the United States, Australia and, increasingly, Europe because of its resources wealth and strategic location.

Major Australian, North American, Asian and European resources companies also have massive investments in mining, energy and other commodity projects in the country.

Ms Genia said that, aside from price stability, one of BPNG's key objectives was to promote growth and employment, "especially of the non-mineral, non-petroleum sector".