The 1994 float and the LNG boom

Papua New Guinea's kina was floated in October 1994 after the Bank of Papua New Guinea ran out of foreign-exchange reserves defending a fixed rate, and the currency lost a large share of its value in the following years. The exchange rate and inflation have since depended heavily on resource exports: gold, copper and oil, and from 2014 liquefied natural gas from the ExxonMobil-led PNG LNG project, which raised export earnings but also concentrated foreign-exchange earnings in a few companies. A commodity price decline in 2014 and 2015 prompted the central bank to manage the kina more tightly, limiting how much the currency could fall and leading to a rationing of foreign exchange, which in turn created gaps between buyers and the limited supply. These resource cycles explain the swings in PNG's growth and exchange-rate series better than domestic demand does.