PNG is Facing Fuel Crisis and Experiencing Worsening Economy

PNG is Facing Fuel Crisis and Experiencing Worsening Economy

How the Foreign Currency Issue is Fueling Papua New Guinea's Fuel Crisis and Worsening Economy

by 

Exepreneur Magazine

19 February 2023.

Papua New Guinea (PNG) is currently facing a fuel crisis due to unresolved foreign currency (FX) issues that have left the country with a severe shortage of fuel.

The issue of FX, or foreign exchange, is complex and has many economic variables such as GDP, inflation, economic growth, employment, and more.

The ongoing standoff between PUMA Energy and the Bank of Papua New Guinea (BPNG) has brought this issue to the forefront and has raised questions about the sufficiency of the government's foreign currency reserves.

The country's high inflation rate and the skyrocketing prices of goods and services have only compounded the fuel shortage issue, which has had a significant impact on the economy.

The fuel shortage has caused disruptions to the aviation industry, with Airlines, forced to ground flights, leaving passengers stranded for days.

This has caused a ripple effect on other industries, as businesses have been unable to transport goods and people, resulting in losses for both companies and individuals.

In an attempt to address the issue, the government is now in serious discussions with Kumul Petroleum Limited and three multinational petroleum companies, including ExxonMobil, Total Energies, and Santos.

The discussions as we reported earlier are focused on finding both immediate and long-term solutions to secure the domestic market, such as importing fuel and constructing another locally-based refinery for downstream processing.

The government's discussions with Kumul Petroleum, MRDC, ExxonMobil, Total Energies, and Santos aims to ensure the country's fuel security, including aviation fuel and general fuel.

Prime Minister James Marape has emphasized that the country is leaving no stone unturned in the search for solutions, stating that the government must act urgently to address the reliance on one or two suppliers for fuel.

The fuel crisis has highlighted the need for PNG to diversify its economy and reduce its dependence on the export of natural resources, such as petroleum and gas.

The government has been moving towards downstream processing of its resources to increase the value-add of these resources and create more jobs in the country.

However, recent events have shown that the country still has a long way to go in terms of achieving true economic diversification and stability.

The government's discussions with petroleum companies are a step in the right direction, but a long-term solution is needed to ensure the country's fuel security and economic stability.

The government must address the root causes of the fuel crisis and work towards implementing structural reforms to create a more stable and diversified economy.

Photo Credit: Puma