The Kina Didn't Fall. It Was Pushed, So Who Signed Off on Your Shrinking Kina?

by PAUL L. KEBAIJA

At Bank South Pacific's counter today, K5,000 buys US$936.50 in cash. Sent by telegraphic transfer, it buys US$1,083.50. At the end of 2022, the same K5,000 was worth about US$1,420 at the official rate. That slide was not an accident of the market. It was policy, and the people paying for it were never asked.
The kina does not float. The Bank of PNG sets it against the US dollar under what it calls a crawl-like arrangement, and it has walked the currency down since April 2023, the month after the IMF approved PNG's loan programme. The kina closed 2023 at US$0.2683, fell 6.8 per cent through 2024, and now sits near US$0.224, about 21 per cent below where it stood at the end of 2022. At a Lae investment forum in 2024, ANZ's institutional banking director Edwin Shankar put it plainly: "The Kina depreciation has come about as a result of the International Monetary Fund loan."
The official defence is that the kina was overvalued. The central bank's September policy statement says that overvaluation "has narrowed". The kina did not become overvalued by itself. For close to a decade BPNG held the rate up by rationing dollars, leaving importers and investors in queues that reached more than K1 billion in unfilled orders by 2024. When the IMF Board praised improved dollar access last December, its deputy managing director credited the "increased flexibility of the Kina". Dollars became easier to find because they became more expensive. The country is now paying through prices for a rate the central bank defended through shortages.
Headline inflation jumped to 5.3 per cent in the June quarter from 2.2 per cent in March, and BPNG itself lists exchange-rate pass-through among the causes. Rice, tinned fish, fuel, medicines and spare parts are priced in dollars before they reach the wharf. A kina that bought nearly 49 Australian cents in mid-2013 now buys about 31. Every family paying school fees in Brisbane or hospital bills in Cairns feels that number.
The bank counter takes its own cut. Buy US$936.50 in notes from BSP today, sell them straight back, and you receive about K3,935. More than a fifth of the K5,000 disappears in one round trip. Cash costs money to fly in, insure and guard, but a spread that wide is a question the central bank that licenses the banks should be asking out loud.
Depreciation has winners. Exporters paid in dollars collect more kina, and so does a government whose resource taxes and dividends are earned in foreign currency. The State also borrows in dollars, and Development Policy Centre economist Maholopa Laveil has noted that debt-servicing costs are rising as interest rates climb and the kina falls. Government sees both sides of that ledger. Households see only the price tag.
The promised turnaround keeps moving. In May 2024, ANZ economists told The National the kina would keep falling until 2025 and turn around in 2026. Kina Bank's latest published forecast has it still sliding to US$0.2229 by December. Papua LNG, the project bankers said would shift the market in 2026, was still described in September as nearing a final investment decision. The IMF programme ends this year, a year before the 2027 election, and Laveil notes its conditions stopped short of banning foreign exchange rationing. Nothing in the programme stops the queues coming back once the IMF leaves.
BPNG owes the public three things. The first is the end point of the crawl and the rate it considers fair value. The second is a timely trade-weighted index, so people can see the kina against the currencies PNG actually trades in, not just the US dollar. In the first half of 2025, Bobby Kunda and Stephen Howes found the kina fell 2.5 per cent against the dollar but 8.1 per cent against a trade-weighted basket. The third is a breakdown of retail spreads at the banks it supervises. Treasury owes an account of how much the slide has added to the kina cost of external debt. Until those numbers are public, K5,000 for a thousand dollars is not a market price. It is the bill for a decade of decisions made without the people now paying it.

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