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Business |
PNG faces risk of ‘debt distress’:
IMF
THE PNG Government needs to continue
its prudent management of debt over the medium-to-long term in
order to mitigate risks to public debt sustainability, the
International Monetary Fund (IMF) has said.
IMF said although PNG had made significant progress in reducing
its public debt burden, with most indicators showing that the
economy’s debt was manageable, PNG faced a moderate risk of “debt
distress”.
“The outlook is particularly sensitive to changes in real GDP
growth and to the exchange rate, highlighting the vulnerability of
debt dynamics to potential shocks and the need to avoid policy
slippage,” IMF said in its Country Report for March this year.
“To further help guard against these vulnerabilities, PNG should
ensure that any external borrowing is obtained on concessional
terms, in line with its debt strategy.”
The public sector debt ratio declined from 67.4% at the end of
2003 to an estimated 39.3% of GDP at the end of last year. This
improvement reflects prudent fiscal policy, favourable mineral
sector developments (in particular, strong export prices in recent
years), kina appreciation, lower interest rates and a sustained
recovery since the current Government took office in mid 2002.
Of total public debt, approximately 50% is external debt, of which
47% of loans are in US dollars, 36% in Japanese yen and 14% in
euros.
Multilateral debt accounts for about two-thirds (ADB and World
Bank) of external debt.
Last year, the Government implemented the debt strategy which
helped to improve debt sustainability, reduce financial risk of
the debt portfolio, and develop the Inscribed Stock, Bill and Loan
Markets. Debt strategy is largely determined by the fiscal
strategy.
Secretary for Treasury Simon Tosali said the new final budget
outcome (FBO) document shows that the FBO for last year showed a
budget surplus of K430.2 million which had been used for debt
reduction.
 
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