International credit ratings agency, Moody’s, is concerned about economic mismanagement in PNG and has put its credit rating on “negative watch”.
Shadow Minister for Treasury & Finance, Ian Ling-Stuckey, says this is only the fourth time in the last two decades that PNG has been put on this negative watch, meaning there is an increased chance of a credit ratings downgrade.
“PNG’s credit rating at B2 was already five grades down from investor ‘prime’ status,” stated the shadow minister in a statement.
“This is very bad news for cash flows in the country, especially as the government did not use hundreds of millions of extra cash offered by the private sector in March.
“Treasurer Charles Abel should explain why it did not take up this offer. It is also bad news for PNG’s crippling foreign exchange shortages. The O’Neill/Abel government must lift its game to rebuild business confidence and international confidence.
“This needs more than just an APEC meeting – it means a return to economic policies to rebuild non-resource growth in the interests of the people of PNG” said Ling-Stuckey.
He pointed out that the latest assessment of the PNG economy by Moody’s also reduces estimated GDP growth in 2018 down to only 0.5 percent - a reduction of 2.5 percent.
“While this reduction is mainly a result of the PNG earthquake and reduced LNG exports for 8 weeks, it also reflects badly on economic mismanagement,” Ling-Stuckey stated.
“An Alternative Government is required – one that has the policies to lift growth back to at least the 5 percent level.
“The Bank of PNG Governor said last month that PNG’s long-term growth rate could even be higher at 6 to 7 percent. Instead, PNG has the lowest growth performance in the Asia-Pacific region from 2017 to 2019 according to the World Bank – and that was even before the earthquake.
“The Moody’s report is extremely worried about the refinancing risk from more and more short-term Treasury debt.
“Interest rates have also doubled under this government. Moody’s is concerned that ‘interest payments will absorb 15.1 percent of government revenues in 2018, higher than many similarly-rated sovereigns, and up sharply from recent years.
“Indeed, interest costs in 2017 totalled over K1.6 billion – 260 percent of the costs of the so-called free education policy and 8,000 percent higher than the so-called free health policy.
“This government, through economic mismanagement, has got its priorities seriously wrong,” stated the Shadow Treasurer.
“I’ve been saying since the 2018 budget that international investors can look through the fake budgets of Treasurer Abel and see how bad things have become.
“Although there are positive comments about the new medium-term fiscal and debt strategies, people looking at our budgets and reports can already see the gap between the promises and the reality.
“As Moody’s says in very diplomatic language: ‘But very low scores on institutional framework imply policy implementation and effectiveness will continue to be challenging.’
“Let me be more frank – the world is doubtful about the sweet language of planning documents becoming reality. The fake figures in the latest budget documents with accounting tricks hiding at least a K1 billion blowout in the 2017 deficit continue to damage our international economic standing.
“This harms prospects for investment and jobs – an APEC show just can’t overcome the underlying deficiencies. There are better options – and these are with the Alternative Government and its growth strategy,” reiterated Ling-Stuckey.