Governor of Bank of Papua New Guinea (BPNG) says the domestic banking
system has the capacity to finance the 2015 budget deficit.
He pointed out that total liquidity in the system is K8.9 billion.
Bakani said the liquidity was held in different forms of instruments,
including cash and securities issued by the Government and BPNG.
“The Bank of PNG has K1 billion in Central Bank Bills that are held by
licensed financial institutions. The level of liquidity in the financial
system is more than adequate to finance the budget deficit and
available for borrowing by the public,” Bakani said.
Regarding the exchange tax, he stressed that the regime remained a floating exchange rate regime.
He clarified that it was not a pegged exchange rate as some commentators
and sectors of the business community have portrayed in relation to the
introduction of the exchange rate trading band.
“The only changes effected by the introduction of the exchange rate
trading band, is to reduce the exorbitantly high margins of foreign
exchange trading by the authorised dealers to 75 basis points, above and
below the interbank market rate.
“It has nothing to do with the exchange rate regime.
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