PNG GROWS STRONG

PNG grows strong say, Prime Minister o'neill.

Papua New Guinea is on track to achieve its forecast 21% gross domestic product growth next year despite concern hanging over its current debt level, Prime Minister Hon. Peter O’Neill says. He was responding to Moody’s Investors Service report which says the country’s start-up last month of liquefied natural gas exports “is a transformative development that will positively impact economic growth, the government's fiscal position, and the balance of payments”.

The reports says: “The successful implementation of this large investment – the PNG LNG Project – paves the way for additional projects that will more productively monetise the country’s ample endowment of energy and mineral resources. It also supports the prospects for sustaining PNG’s recent track record of high growth.”

Prime Minister Hon. Peter O’Neill welcomed Moody’s confirmation of the country’s sovereign rating which remains at B1 (stable outlook), saying critics of the Government should stop “scaremongering and spreading falsehoods about our economic future”.

“The report confirms the Government’s estimate that PNG will achieve world-beating gross domestic growth of 21% in 2015,” he said.

“Moody’s have confirmed our sovereign rating is unchanged, despite the considerable economic challenges we have faced principally brought about by low process for our major mining exports.” Moody’s conclusions were contained in its just-released credit analysis which looks at the country’s credit profile in terms of economic strength (assessed as low); institutional strength (very low); fiscal strength (high) and susceptibility to event risk (moderate). They represent the four main analytic factors in its sovereign bond rating methodology. The analysis constitutes an annual update to investors and is not a rating action.

The report describes the PNG LNG project as “the most notable economic development of the past few years, and perhaps of PNG’s relatively short history as a country”. Moody’s report however points out the country’s current risks, including the government debt level.

“Fiscal rules have been continually amended to accommodate the consequently large increases in debt, allowing for a rise in debt beyond statutory limits and eroding the country’s track record of fiscal prudence,” it says. “Primary fiscal surpluses have reverted to increasingly wide deficits since 2012, although funding pressures have been muted, given the government’s reliance on low-cost domestic sources of financing. “Revenue growth has been adversely impacted by developments in the mining sector – including lower global prices for the country’s commodity exports – and the situation reflects in part the lack of diversification in the economy.

“At the same time, the run-up in public spending leverages upon the fiscal space afforded by the decade-long decline in the government’s debt burden, while also assuming significant revenue accretion from LNG exports over the near-term.