BANK CAN'T CURB PNG'S KINA FALL, SAYS VELE

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By Kevin Pamba

PORT MORESBY, Papua New Guinea (May 29, 1999 - The National)---The Bank of PNG cannot presently control the free fall of the kina, the bank's governor, Morea Vele, said at a media conference.

"Don't ask me where it (kina) will settle...it's a floating currency," Mr Vele said in answer to a question by The National.

The governor said since the local currency's initial devaluation and floatation in late 1994, the kina has been subject to market conditions and that is what is precisely happening at present.

Earlier this year, Mr. Vele told a gathering of business leaders that the kina would not be allowed to fall below the United States 40 cents mark and the foreign reserves would not be as low as the 1994 figures when the kina was devalued by 10 percent and floated.

Yesterday on the ANZ Bank's telegraphic transfer rates, the kina plunged to a historic low against the United States, Australian and other major currencies.

Against the US dollar the kina fell to US$0.3680 while against the Aussie it fell to A$0.5605.

On the official BPNG closing yesterday, the kina was at US$0.3850 and A$0.5915.

When asked if exporters were holding receipts offshore because of the foreign exchange volatility, the BPNG's deputy governor for policy and regulation, Flora Carruthers, said that the bank was mindful of such a situation and was keeping watch.

She said, by law, mining and petroleum companies have to bring their export earnings within three months while the agricultural sector has six months to bring in its export receipts.

Mr Vele reiterated government assertions that the three avenues of sourcing external finances for the 1999 Budget shortfall of K222.2 million - Eurobond issues, Kredit Bank Corp loan and resuming of talks with World Bank and IMF - were being seriously looked at.

He said the Eurobond issue is not a failure as made out by the media but will eventuate when all necessary conditions are set in place by the middle of June. He said the change in interest rate percentage from the initial 12 per cent to an undisclosed sum was because in the last week of the roadshow in the US inflation figures rose exerting inevitable pressure to raise interests on the bond issues.

Therefor he said comments against the bond issue were uninformed and premature.

Mr Vele also said the World Bank was finalising their draft report on PNG and a team is expected in the country by next month - after the bank's board meeting on June 8.

For additional reports from The National, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The National (Papua New Guinea).

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