Bank of Papua New Guinea Monetary Policy Announcement June 2026

Monetary Policy Committee Bank of Papua New Guinea +675 322 7200 info@bankpng.gov.pg www.bankpng.gov.pg ToRobert Haus, Douglas Street, Port Moresby NCD PO Box 121 Port Moresby NCD For Immediate Release PORT MORESBY, 3 June 2026 MONETARY POLICY STATEMENT MPC MEETING 2/2026 Monetary Policy Committee Maintains the KFR at 5.0 Percent At its June 2026 meeting, the Monetary Policy Committee (MPC) agreed to maintain the Kina Facility Rate (KFR) at 5.0 percent and continue the crawl-like arrangement in the exchange rate supporting an orderly pace of adjustment in the Kina. The Committee considered the current policy settings appropriate with the exchange rate framework continuing to serve as the nominal anchor for monetary policy, supporting price stability and broader economic growth. The Committee noted that the global economic outlook has moderated, although uncertainty has increased due to the ongoing conflict in the Middle East. Higher fuel prices, freight costs and supply chain disruptions continue to pose risks to global growth and inflation. Domestic economic activity remains supportive of growth, with indicators pointing to strengthening in both mineral and non-mineral activity. Growth in lending, exports, and private sector demand has strengthened. Foreign exchange inflows have increased and conditions in the domestic foreign exchange market have improved, although market pressures remain. Annual headline inflation fell to 2.2 percent in the March quarter of 2026 relative to the previous quarter, while core inflation measures remained relatively low, posing no urgency to raise the policy rate. However, inflationary pressures are anticipated to increase due to higher imported inflation, exchange rate depreciation and rising domestic transport and food prices. While Government fuel subsidies have helped contain inflationary pressures from fuel price increases. The Committee confirmed the exchange rate remains the nominal anchor for monetary policy. Given weak interest rate transmission and the economy's high import dependence, the exchange rate remains the most effective channel for anchoring inflation expectations. The Committee will continue to support the development of the interbank market and other reforms needed to strengthen the monetary policy framework. The current monetary policy stance was assessed as appropriate. While external risks have increased, inflation remains relatively contained and foreign exchange market conditions continue to show improvements. The Committee will continue to closely monitor developments in global and domestic economic conditions, including inflation, commodity prices, and conditions in the domestic foreign exchange market. In the event of increased inflationary pressures, MPC will take necessary policy action to maintain price stability. Authorised by: Ms. Elizabeth Genia GOVERNOR | on behalf of the Monetary Policy Committee

Monetary Policy Committee Bank of Papua New Guinea SUMMARY OF MONETARY POLICY COMMITTEE (MPC) DELIBERATIONS MONETARY POLICY COMMITTEE (MPC) MEETING 2/2026 The meeting opened at 9.10 am The Committee reviewed the Bank’s newly developed GDP and inflation nowcasting models, noting that the models provide timely estimates of GDP growth and inflation before official data becomes available. The Committee welcomed the progress made in developing the models and agreed that continued refinement and evaluation of the models would help strengthen their reliability for policy analysis and decision-making. The Committee discussed the latest real effective exchange rate (REER) misalignment estimates, noting that while different estimation approaches continue to produce varying results, they broadly point to the same direction – that the degree of REER misalignment, or Kina overvaluation, has narrowed following the exchange rate adjustment under the crawl arrangement. Members also noted improvements in foreign exchange market conditions, including improved market clearing and reduced intervention requirements, although some foreign exchange backlog and market imbalances remain. The Committee agreed that REER overvaluation estimates should be considered alongside broader foreign exchange market indicators when progress toward full Kina convertibility. The Committee reviewed the May 2026 Economic and Financial Market Update provided by BPNG staff. Members noted that global growth is projected to moderate while inflation risks have increased due to geopolitical tensions in the Middle East, higher energy prices, and supply chain disruptions. Domestically, members noted indications of strong economic activity as indicated by the nowcasting models, improving foreign exchange inflows, rising imported inflation pressures, elevated liquidity conditions, and continued improvements in foreign exchange market conditions, including reductions in foreign exchange order book and increased interbank market activity. The Committee also discussed monetary and financial conditions, including strong growth in monetary aggregates, high overall banking system liquidity, developments in interest rates, and continued Government fuel subsidy in response to high international oil prices. The Committee noted that while economic activity remains supportive, rising inflationary pressures and external risks warrant maintaining a cautious and evidence-based monetary policy stance. Finally, the Committee discussed the policy recommendations of the BPNG staff on monetary policy and the exchange rate. The meeting closed at 1:34 pm.

Monetary Policy Committee Bank of Papua New Guinea MPC MEMBERS VOTING DECISIONS MPC Members Decision Matrix RATIONALE FOR EACH MPC MEMBERS VOTING DECISION Governor Elizabeth Genia Governor Genia considered the current policy settings appropriate. While core inflation measures indicate emerging underlying inflationary pressures, inflation remains relatively contained and moderated by Government support measures. Inflationary pressures are not yet sufficiently persistent to warrant a further tightening of monetary policy at this stage. Changes in the KFR, while serving as a supporting policy instrument to the exchange rate in the current monetary policy framework, have yet to materially influence commercial bank lending and deposit rates, reflecting ongoing weakness in monetary policy transmission and highlighting the importance of promoting the development of the interbank market. Conditions in the foreign exchange market have continued to improve with lower order backlogs and shorter waiting times. Foreign reserves are above international benchmarks, supporting confidence in the crawl-like exchange rate arrangement and progress toward Kina convertibility. Deputy Governor Jeffrey Yabom The oil supply shock has impacted the global economy and many of PNG’s trading partner economies resulting in increased fuel prices and global inflation. In response, the PNG Government implemented a fuel price subsidy program to maintain fuel prices at pre-crisis levels, however, price pressures are starting to build up as imported inflation feeds through to the domestic economy. Domestic inflation outcome for the March quarter was 2.2 percent and is expected to moderate in 2026. However, at some point, if inflationary pressures start to increase significantly, the Bank will take necessary policy actions to contain domestic inflation. With inflation expected to moderate in 2026, it is prudent to support the decision to maintain the policy rate, the KFR, at 5.0 percent, and to continue the depreciation of the kina exchange rate to achieve kina convertibility. Governor Deputy Governor Mr. Scott Roger Professor David Kavanamur Mr. Dairi Vele RESULT

1. Kina Facility Rate (KFR) 5.0% 5.0% 5.0% 5.0% 5.0% KFR maintained at 5.0%
2. Crawl-like exchange rate arrangement Maintain current pace of adjustment Maintain current pace of adjustment Maintain current pace of adjustment Prefer slower pace of adjustment Prefer slower pace of adjustment Maintained current pace of exchange rate adjustment
3. Cash Reserve Requirement (CRR) Maintain at 9.0% Maintain at 9.0% Maintain at 9.0% Maintain at 9.0% Maintain at 9.0% CRR maintained at 9.0%

Monetary Policy Committee Bank of Papua New Guinea To support policy transmission, some of the monetary policy tools will be recalibrated to improve their effectiveness. Liquidity in the banking system remains high to support lending activity at current interest rates, however, its spillover to high import demand will continue to put pressure on the exchange rate. Professor David Kavanmur Professor Kavanamur preferred maintaining the KFR and slowing down of crawl rate given the uncertainty around inflationary pressures and temporary benefits of fiscal intervention on fuel subsidies without which any further depreciation may be counterintuitive to both the convertibility and price stability objectives of monetary policy. A more gradual pace of exchange rate adjustment is warranted and would provide an opportunity to better assess underlying inflation while continuing with progress toward Kina convertibility. Further exchange rate depreciation at this stage could risk adding to inflationary pressures without materially advancing the objectives of convertibility or price stability. Mr. Scott Roger The outlook for economic activity remains uncertain. The disruption of global energy supplies is likely to hamper growth in PNG’s major export markets. At the same time, PNG is benefiting from higher energy export revenues. The net effect does not appear likely to add to inflation pressures. Most measures of inflation remain subdued. Although government tax measures have contributed to holding inflation down, the downward trend in core inflation seen since last year has continued. Against this background, Mr. Roger felt that a further easing of the stance of monetary policy is appropriate, through continued depreciation of the kina in real terms. While the primary objective is to stabilize inflation, further exchange rate adjustment will also facilitate restoration of kina convertibility and support growth of activity and employment in the non-mineral sectors of the economy. Mr. Dairi Vele Mr. Vele voted to maintain the KFR at 5.00 percent, noting that inflationary pressures were driven by temporary fuel and food supply shocks rather than domestic demand pressures. The inflation outcome is also consistent with the lower recommended rate of crawl depreciation. Accordingly, a tightening of monetary policy through the KFR is not warranted at this time. Mr. Vele voted to maintain the CRR at 9.0 percent, noting that higher liquidity largely reflects the accumulation of precautionary foreign exchange reserves rather than a sustained expansion in credit growth. As such, there is no evidence of structural excess liquidity requiring a change in reserve requirements. Mr. Vele voted to reduce the rate of the crawl of the depreciation by 50.0 percent, reflecting analysis by the Bank that the REER has adjusted to a slight undervaluation. While the remaining FX backlog and need for some intervention suggest a complete halt is premature, stronger balance of payments inflows support a slower pace of depreciation despite ongoing global fuel and cost uncertainties. Next Meeting The next Monetary Policy Committee meeting is scheduled for Monday, 7 September 2026.