THE prices of goods and services in Papua New Guinea have continued to increase since the second quarter of 2021, according to the Bank South Pacific (BSP) Financial Group Ltd.
The consumer price index (CPI) rating is 6.9 per cent, closing the first quarter of this year.
It is the highest level rating since 2010.
To counter this high domestic inflation, the Bank of PNG (BPNG) has tightened its monetary policy by increasing the kina facility rate by 0.25 per cent to 3.25 per cent this month.
BSP’s Group general manager for corporate banking, Peter Beswick said in the BSP Pacific Economic and Market Insight Q2 2022 Report that it would result in the finance sector reviewing loan and deposit interest rates.
The kina facility rate is to serve as the interest rate at which funds can be lent or borrowed.
It is a monthly rate and any changes to it should translate to market interest rates.
“The Bank of PNG (BPNG) has flagged the tightening monetary policy, with an increase in the rate to 3.25 per cent in July,” Beswick said.
“This move is to counter high domestic inflation.
“BPNG has noted the key drivers of inflation as being import inflation (through fuel and food), caused by the pandemic and Russia-Ukraine conflict.
“Inflation and living costs are expected to remain high for the remainder of 2022, as global recession fears affecting fuel, energy and logistic costs globally.”
Beswick said PNG should therefore benefit from increased prices on commodity exports.
But he said the lift could be partiality offset by reduced export volumes in the agricultural sector, as smallholders and regional communities are involved in the general election.
The National / Pacific Business News
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