Kina overvaluation drops to 1.6 per cent

Treasurer Ian Ling-Stuckey says Kina overvaluation has dropped to 1.6% *(Image: NBC News / Suli Suli)*

The overvaluation of the kina has dropped significantly from a high of 16 per cent to just 1.6, according to Treasurer Ian Ling-Stuckey.

The Treasurer confirmed that work is ongoing to align the national currency with its actual market worth, a move aimed at resolving chronic foreign exchange [FX] shortages that have hampered the business community for years.

Responding to questions from Opposition Leader James Nomane in Parliament, Ling-Stuckey stated that previous assessments had the kina overvalued against the US dollar by double digits.

"The issue then, if we all recall, we were advised that the kina was overvalued compared to the US dollar. Figures ranged between 10 to 16 per cent," Ling-Stuckey said. "Today, I'm advised that the figure might be around 1.60 per cent. That’s dropped down a lot."

The Treasurer said government expects these figures to be formally verified by the International Monetary Fund [IMF].

"We hope to have that confirmed when the IMF reach PNG at the end of this month for our sixth and seventh review. From there, we will determine what the next course of action is," he said.

The government has been pursuing a gradual depreciation strategy to correct the currency imbalance. Ling-Stuckey recalled a period where the country had almost no access to foreign exchange, with outstanding orders exceeding K2.4 billion.

The Treasurer said stabilizing the currency is a prerequisite for major international investment. He said significant Foreign Direct Investment [FDI] is unlikely to peak until the FX issues are fully addressed.

"Most of our reports shared by our commercial banks have made it very clear," he said. "As soon as we can get FID [Final Investment Decision] on our resource projects, FDI will come in and that will drive the value of the kina and increase our exchange rate."

The Treasurer maintained that the current strategy is the most stable path towards economic recovery, despite pressure from the Opposition regarding the pace of the correction.