Former Prime Minister Mekere Morauto warns of looming economic storm
An economist and former head of Treasury, the Bank of Papua New Guinea and other institutions, Sir Mekere said the nation could not continue on its present course.
“The Prime Minister has had plenty of warning from his own expert advisers in Treasury and from eminent foreign institutions and observers,” Sir Mekere said.
“Good senior people in Treasury have been side-lined or sacked, or shipped out if a foreigner. Anyone who raises concerns suffers personal attack from the Prime Minister.
“Or, as with the peaceful protesters who gathered at Unagi Oval on 26 October, being set upon and bashed up by the police, no doubt on orders from above.
“He has ignored all advice, and now the nation is suffering the consequences.”
The latest warnings come from the international ratings agency Standard & Poor’s (S&P), in its annual review of the Bank South Pacific (BSP), and from the World Bank in its annual ranking of countries’ business environment.
BSP’s long-term rating has been downgraded from stable to negative, and Papua New Guinea has fallen four places in the World Bank ranking.
On the BSP downgrade, Sir Mekere said the ratings agency had not said there was anything wrong with the bank itself – it appeared to be in good health and was well managed.
The problem, according to S&P, is the economic and regulatory environment in which BSP operates. “That environment is not created by BSP but like all other businesses, BSP is engulfed by it,” Sir Mekere said.
“In other words, the economic and financial damage has now spread to the private sector – and to the largest financial institution in the country, on which millions of Papua New Guineans and thousands of businesses rely.
“The downgrade means that unless the economic and regulatory environment is not fixed quickly, the cost of borrowing from banks will increase, interest rates on savings and investments will fall, and bank fees and charges will rise. Inflation, prices of goods and services, are also likely to increase as a result.
Sir Mekere said S&P was very clear that the Government’s fiscal policies and practices were the cause of problems and thus the downgrade.
It said:
“We believe that Papua New Guinea's financial institutions face increasing risks stemming from increasing credit pressures on both the sovereign and broader operating environment as a result of lower global energy prices.
“We consider it unlikely that BSP would be insulated from increasing credit pressures on both the sovereign and the broader operating environment as falling export revenues increase the risk to the government's financials and the economy's external vulnerabilities.”
Sir Mekere said that neither Papua New Guinea nor the Prime Minister is in a position to influence commodity prices.
“All we can do is make urgent downward adjustment to expenditure to accommodate falling revenue,” he said.
“Our problem is that the Government has been on a populist spending spree for the last three years, spending money it did not have, by turning the Central Bank into a money-printing house, and has left the adjustment it needs to make too late.
“As a result, the adjustment will be long and painful, and people and services will suffer.
The downgrading of BSP comes soon after S&P and another leading ratings agency both downgraded the outlook for the country from stable to negative.
Post a Comment