Media Release |
FOR IMMEDIATE RELEASE 03 June 2025
Following its June meeting, the Monetary Policy Committee (MPC) maintained the Kina Facility Rate (KFR) at 4.0% and reduced the Cash Reserve Requirement (CRR) to 10.0%. The Committee was encouraged by developments over the past quarter, including the continued improvement in foreign currency availability and a modest easing in underlying inflation, though it also noted that liquidity remains unevenly distributed.
While underlying inflation has continued to ease, headline inflation edged higher over the three months to March 2025, largely driven by a turnaround in domestic (non-tradable) inflation. The Committee views this divergence as indicative of emerging price pressures, though not yet sufficient to warrant a change in the policy rate. The MPC will continue to monitor inflation trends closely, particularly in light of the uncertain global outlook and ongoing trade-related developments
Conditions in Papua New Guinea’s foreign exchange market have continued to improve, supported by increased foreign currency availability and a notable reduction in the backlog of FX orders. These improvements mainly reflect higher commodity prices for key PNG exports of gold, coffee and cocoa and the gradual and measured depreciation of the Kina, which the Committee views as necessary to restore PNG’s competitiveness with its international trading partners.
The Committee agreed to continue with the crawl-like exchange rate arrangement and to closely monitor outstanding foreign exchange orders as well as the responsiveness of foreign currency inflows to the lower exchange rate. Weekly FX auctions will also continue to support the market with auction volumes determined by the MPC based on available liquidity and the level of outstanding orders.
Domestically, while there is ample liquidity overall in the banking sector, its distribution among the commercial banks remains uneven. The decision to lower the CRR to 10.0% is aimed at easing liquidity constraints and strengthening the monetary policy framework by promoting a more even distribution of liquidity across the banking system.
The Committee views the economic outlook as broadly balanced, though there is greater uncertainty surrounding the global trading environment. The Committee will continue to assess the effectiveness of its policy settings and stands ready to make further adjustments if necessary.
Authorised by:
Ms. Elizabeth Genia
GOVERNOR | on behalf of the MONETARY POLICY COMMITTEE
📄 Download the Monetary Policy Statement - June 2025