Westpac February PNG Economic Update
The February PNG Economic Update reviews the overall economic situation in Papua New Guinea, the state of the local financial markets plus the outlook for cocoa and gold.
Read the full report with more analysis, data and charts at: February PNG Economic Update (PDF 2MB)
The Asian Development Bank (ADB) provided a US$100 million loan to PNG to enhance public sector governance and accountability. This is part of a US$250 million program focusing on fiscal management, SOE governance, and climate change considerations.
Kumul Petroleum Holdings Limited (KPHL) paid a final K150 million dividend to the State, totaling K300 million for 2024. Despite financial challenges, KPHL has delivered over K3.2 billion in dividends since 2014 and is preparing for further petroleum developments.
Ok Tedi Mining Limited (OTML) replaced two 40-year-old Ball Mill Units for USD$14.59 million, boosting daily production by USD$150,000 and providing upskilling opportunities.
At PNG Investment Week, Prime Minister Marape announced plans to privatize part of PNG Power Limited, and Telikom PNG confirmed ongoing privatization plans.
Prime Minister James Marape urged Papua New Guineans to emulate South Korea's transformation from poverty to prosperity through hard work, innovation, and effective policies. He highlighted South Korea's GDP per capita growth from US$63 in 1953 to over US$33,000 in 2023, compared to PNG's under US$3,000. Marape stressed better utilization of PNG's land and resources, commended young entrepreneurs, and called for unity and action for a prosperous, self-reliant PNG.
Geopacific Resources launched a US$40 million entitlement offer for its Woodlark gold project, funding a 30,000-meter drilling program and updating its Definitive Feasibility Study by the end of 2025.
Great Pacific Gold Corp. (GPAC) raised $5.05 million for diamond drilling and exploration at its Kesar and Wild Dog projects, supporting general expenses and exploration activities.
The Independent Commission Against Corruption (ICAC) has formed the Anti-Money Laundering Joint Taskforce (AMLJTF) with key government departments and the Bank of PNG to combat money laundering and recover assets. This aligns PNG with the Financial Action Task Force (FATF) standards. The FATF Mutual Evaluation Report (MER) highlighted PNG's lack of skilled personnel, resources, and prioritization. PNG must implement FATF recommendations by October 2025 to avoid grey-listing, which could harm its economy and international reputation.
The Kina Facility Rate (KFR) remained at 4% in February 2025, steady since November 2024 after rising from 3% in September. The Fixed Rate Full Allotment (FRFA) 7-day rate adjusted accordingly.
On January 31st, the FRFA received K1,422m in excess market liquidity, down from K1,542m mid-month. The 7-Day FRFA bill closed the year at 4.00%, up from 2.50% at the year's start, in line with KFR.
The 364-day benchmark bill's weighted average rate stayed at 8.65% on December 27th, unchanged for the second time in 20 auctions. The auction saw a K90,500m undersubscription from K340.44m offered, with 92% of bids for the 364-day tenor. Despite this, the successful bid rate rose by 11% to 98%.
In January, 364-day TBill yields stabilized, ending slightly lower at 8.50%. Subscription amounts doubled, showing strong interest. The final auction saw an oversubscription of K400.9m from K260.62m offered, with K338.37m in successful bids.
The latest GIS Auction on December 27th saw strong demand for all tenors except the 10-year, which exceeded offers by K1.1m. Rates for 5-to-10-year bonds remained at 9.30% to 9.80%. Successful bids totaled K2,524m, lower than the K6,030m offered.
The PGK continued its crawling-peg depreciation against the USD in December, moving from 0.2516 to 0.2500. January saw a pause, holding at 0.2494 since the 13th. Market turnover increased to K5.71bn in December and K5.618bn in January.
The PGK/AUD exchange rate averaged 0.3861 in November and 0.3951 in December, stabilizing in January.
The AUD fell to its lowest point since early 2020 due to speculation of a dovish shift from the RBA and easing inflation risks, while the US Federal Reserve raised its inflation and interest rate projections for 2025.
The AUD/USD exchange rate remains low, impacted by uncertainty following Donald Trump's presidential win and tariff threats.
BPNG conducted FX auctions totalling K259.310m in December and K400m in January, targeting essential trade and import orders.
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