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Key implications of PNG’s recent CPI figures

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The price of goods and services have continued to increase since the second quarter of 2021, with Consumer Price Index (CPI) rating closing the first quarter of this year at 6.9 percent – the highest level rating since 2010.

To counter this high domestic inflation, the Bank of PNG has tightened the Monetary Policy

by increasing the Kina Facility Rate (KFR) by 0.25 percent to 3.25 percent this month (July

2022).

According to the BSP Pacific Economic and Market Insight Q2 2022 Report, BSP Group

General Manager for Corporate Banking, Peter Beswick said the uplift in the Kina Facility

Rate (KFR) by BPNG in signaling and tightening the Monetary Policy would result in the

finance sector reviewing loan and deposit interest rates.

The KFR intends 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 has flagged the tightening Monetary Policy, with an increase in the KFR

by 0.25 percent to 3.25 percent in July 2022. This move is to counter high domestic inflation.

Domestic prices have continued to increase since the Q2-21, with headline CPI for the Q1-

22 at 6.9 percent. The highest level since 2010,” Mr. Beswick said.

“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,” he added.

Mr. Beswick further said that under this scenario, PNG should benefit from increased prices

on commodity exports. However, this lift could be partiality offset by reduced export volumes

in the agricultural sector, as small holders and regional communities are involved in the

general election.

“In terms of business drivers, we have seen some uplift in select business sectors of the

PNG economy. Hotels & Accommodation providers have seen increases in occupancy

levels, due to additional consultants and short term contractors arriving to assist government

with the general election. Australia has an increased presence, with additional defense force

personal assisting with law and order nationally. While aid agencies have committed

additional resources on the ground to assist with the election operations, logistic and

oversight.

“Major extractive projects on the horizon for 2023, should see improved sentiment as the

PNG economy transitions into its next significant growth phase,” Mr Beswick concluded.

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Finance

Kina Bank to Launch Online Superannuation Tool

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Kina Bank is set to launch its new online banking and superannuation tool.

Single View is a free digital tool for Kina Personal Online Banking customers. It’s set to be a digital game changer that helps customers keep an eye on their financial big picture.

Kina Bank Single View gives customers the ability to link participating superannuation accounts to their Kina Bank Personal Online Banking profile.

Customers can then view their current superannuation balance alongside their banking products in a single view.

A digital banking leader, Kina Bank worked with PNG’s major superannuation funds, including Nasfund and Comrade Trustee Services, to develop the Single View platform.

“This newly developed functionality is fantastic for Kina Bank customers”, said Ivan Vidovich – Kina Bank’s Chief Transformation Officer.

“It offers an at-a-glance view of not just their current savings and card balances, but also their long-term financial position.”

Kina Bank has a strategy of creating digital firsts for its customers and helping them unlock more value when they bank with Kina Bank. Single View will do just that.

“Single View is a first for PNG,” Vidovich said.

“Being able to see all your balances in one place is a simple but important starting point for making good financial decisions. And, it’s just the first of several developments that will bring the convenience of everyday banking and superannuation closer together.”

As PNG’s leading digital bank, Kina is making online banking and money management easier, which can only lead to growing prosperity for people all over PNG.

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Finance

Closure of BSP Sub-Branch at PadiPadi

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Four BSP Sub-Branches are temporarily closed for business due to Law and Order issues in four Provinces.

The recent being the closure of BSP’s Sub-Branch at PadiPadi in the Milne Bay Province as a result of an attempted armed robbery around 12pm yesterday.

BSP CEO Robin Fleming said fortunately, no staff were seriously injured despite being assaulted during the course of the incident.

The closure of BSP at PadiPadi follows the closure of the BSP Bank at Henganofi, Koroba and Yangoru Station due to Law and order issues.

“While there is a need for Banking Services in these communities, such criminal attacks as this put the safety of BSP employees at risk.

“The safety of BSP staff takes priority,” said Fleming.

This is the second attack on BSP at PadiPadi, the first was in 2016.

In May of 2018, a BSP ATM was stolen at Hagita Estate and never recovered.

Another BSP ATM at the Alotau International Hotel was also stolen by criminals in 2019.

As the only bank that operates in rural areas, CEO Fleming appealed to communities to provide the support for BSP to ensure that the provision of these services is not put at risk.

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Finance

Financial Literacy Partnership

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A Memorandum of Understanding signed today between Nasfund and the Center for Excellence in Financial Literacy (CEFI) is desired to produce advocators of the savings culture.

Sixty (60) employees from Nasfund will undergo a Training of Trainers Program and then provide financial literacy training to over 62,000 Nasfund members.

This program is aimed at equipping and upskilling Nasfund Staff on planning, delivering and monitoring financial literacy for Nasfund members.

The MOU is for a 12 month period and was signed by Nasfund CEO, Ian Tarutia and CEFI Director Saliya Ranasinghe.

“The importance of saving for retirement is a priority for the Fund when engaging with our members right across the country.

“This is why working with CEFI is especially meaningful for our staff to drive financial literacy to our members, ” said Nasfund CEO Mr. Tarutia.

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Finance

BSP Reduces Bank Charges

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Over 11,000 BSP SME Deposit customers will see a reduction in bank charges starting tomorrow (1st April 2022)

Despite the National Government introducing the Company Tax under which BSP will now pay K190 million per year, BSP CEO Robin Fleming said BSP recognizes the importance of providing its customers with cost effective services.

“Our SME BSP customers will enjoy a reduction on their Monthly account service fees by K7, from the current fee of K15 per month to K8 per month. They will see a reduction in the fees for an in Branch Eftpos Withdrawal fee from K4 to K2 and Branch Withdrawal Fee from K3 to K2,” BSP CEO Robin Fleming said.

SME Current customers will see a reduction of K2 from the K10 and will only be charged K8 for the Monthly Service Fee. In Branch Eftpos Withdrawal fee from K4 to K2 and Branch Withdrawal Fee reduced from K3 to K2.

Similar reductions will be applied to BSP Personal Account Customers starting tomorrow.

The reduction of fees doesn’t mean BSP will increase fees in other products and services.

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Business

PM Launches and Commits K50million to Credit Guarantee Corporation Limited

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Market failures and imperfections such as information asymmetries, inadequacy or lack of recognized collateral, high transaction costs for small-scale lending, and perceptions of high risk, all of which lead to lack of access to credit for MSMEs.

Despite adequate liquidity in PNG, financial institutions are often reluctant

to lend to SMEs and when they do the high interest rates charges becomes a barrier for SMEs.

These are some of the reasons highlighted by the Acting Governor for Bank of Papua New Guinea, Benny Popoitai for the need to create the Credit Guarantee Corporation Limited.

The entity was launched today by Prime Minister, James Marape.

Credit Guarantee Corporation Limited (CGC) is an entity established by the Bank of Papua New Guinea with the aim of assisting Micro, Small to Medium Enterprises.

The establishment of CGC was approved by the National Executive Council in 2018, under the Medium Term Development Policy III, to address the lack of access for credit and capital for micro small and medium enterprises in the country.

The Bank of PNG has taken the lead to do the preparatory work and incorporated the CGC under the Company’s Act 1997 on 5th January 2022.

The launch today of CGC is to support it as a legal entity that will support the Government’s policy to develop and grow the MSME sector in order to create new employment, achievement sustainable economic growth, and fair and equal distribution of wealth through majority citizen ownership of business activities.

The CGC will support the MSMEs by working with and through participating financial institutions to provide credit guarantee to financial institutions as a credit risk mitigation to lenders to absorb a portion of their losses on their loans made to MSMEs incase of default to encourage them to lend to MSMEs.

BPNG Chairman, David Toa said the establishment of the CGC is necessary to correct inefficiencies evident in resource allocation in the financial intermediary process of the financial institutions.

“The establishment of the Credit Guarantee Corporation (CGC) brings renewed hope into the MSME sector that has been struggling from the combined lack of basic infrastructure and skill sets that are necessary elements for their growth,” Toa said.

The CGC is a partnership between BPNG and Kumul Consolidated Holdings.

Prime Minister has committed K50million from BPNGs dividends to be held back for CGC.

“I want to encourage the financial institutions to fully utilize the services of the

CGC.

“When small businesses do not have sufficient access to financial products and services, they may be deprived of the opportunity to grow their business, and as a

nation, we lose from the benefits of their potential contributions to the economy,” Marape concluded.

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