PNG to continue to face economic crisis: IMF

The country will continue to face economic crisis with a growing risk of fiscal and financial instability as the debt-to-GDP ratio continues to rise and financing of deficits becomes increasingly difficult.

The International Monetary Fund Report Article IV stated that in the absence of any major new resource project to spur investment and depressed Foreign Exchange shortages, the outlook for growth remains under 3 percent while inflation continues to ease.

The IMF Report stated that large financial account outflows related to project debt repayments have contributed to a shortage of foreign exchange.

In these circumstances, IMF recommended that decisive steps be taken to strengthen the country’s fiscal and balance of payments positions.

The Report underlined that a strong commitment to fiscal consolidation over the medium term is essential to reduce the debt-to-GDP ratio and lower the risk of debt distress.

Going forward, IMF recommended that fiscal consolidation should involve expenditure measures, including streamlining public sector employment and payroll as well as prioritising spending on education, health care and infrastructure.

The Report also stated that implementation of a medium-term strategy to increase revenues is also important to support higher and more inclusive growth.

The Report further stressed that increased exchange rate flexibility is needed to address the foreign exchange shortage and to offset the output effects of fiscal consolidation.

The Government had been urged to implement structural reforms to strengthen the country’s non-resource sectors.

However, the Prime Minister in his New Year message said the country’s economy has turned a corner and will see improvements in 2018.

He pointed out developments in commodity prices and new investment in the resources sector to stimulate economic activity and job creation.

PM Peter O’Neill stated that even during the recent tough times, the Government maintained a positive economic growth with political stability.

Author: 
Freddy Mou