Kina continues to fall after Christmas rally


PNG’s kina has continued to fall against its major trading currencies, and is now at levels below those of September 2013, following a brief rally in late 2013 and early 2014.

kinaThe kina is at its weakest against the Australian dollar since May 2011; as low against the US dollar as it has been since July 2010 and the lowest it has been against the euro since January 2010.

The recent fall in the value of the kina is in keeping with PNG’s economic fundamentals and trending down towards its long-term average, according to ANZ’s April Pacific Quarterly.

The kina is currently earning US$0.37, compared to US$0.41 in December, after the Governor of the Bank of PNG, Loi Bakani, intervened, spending US$140 million (K352 million) to ensure a measured fall during the September quarter.

In his March economic report, Bakani said the average kina exchange rate depreciated by 12.6% against the US dollar between March 2013 and March 2014.

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‘The depreciating kina provided some relief to PNG farmers and exporters. It was also expected to boost agricultural exports, but due to poor transport infrastructure and other industry-specific constraints, there was little, if any, supply response in production,’ he said.

‘This re-emphasizes the need for the Government to invest in the development of the agriculture sector, through the introduction of new technological innovation for production and processing of all major agriculture commodities and food varieties.’

ANZ ‘s April Pacific Quarterly projects the kina will continue to fall to US$0.35 by December 2014 and maintain that position until at least December 2015.

‘Further out, if LNG exports do bring significant foreign currency flows onshore,’ says Daniel Wilson, the ANZ’s Lead Pacific Economist, ‘the Bank of Papua New Guinea will likely closely monitor the kina to avoid the “Dutch Disease,” which is a decline in manufacturing competitiveness as a result of strong currency appreciation due to income from natural resources’.

Kina chart

The Papua New Guinea kina against the US dollar over the past five years.

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