Barker: Debts increasing

Business

THE country’s debt level increased over the last seven years, economist and director for Institute of National Affairs Paul Barker says.
He said PNG had been finding itself getting into a bit of a debt-trap over the last decade.
“Beginning of the last decade, we had about 71 per cent (of the overall economy) debt to our GDP (gross domestic product) level,” he said.
“During the 2000s, we managed to reduce that debt level substantially because the economy grew and we managed to pay back some of the debts as well.
“So we reduced it to being something more like six or seven per cent. That was about 2010.
“Unfortunately, since then, the debt level has been growing substantially again.
“So every single year since 2012, we’ve been having a high level of borrowings.
“The Government has been wanting to spend quite a bit on major programmes, it’s been pretty optimistic.
“Growth level increased during the PNG LNG construction phase.
“We had the production phase of the LNG occurring, growth was growing considerably in 2012 to 2015, so we could spend money pretty heavily.
“The Government was borrowing pretty heavily every single subsequent year.
“There’s nothing really wrong with borrowing to carry you through downturns, but you don’t want to do it on a longer term basis.”
Barker said the real issue over the last seven years was not debt to GDP ratio but an increase in the country’s debt level and the debt-servicing level. “So now they (Government) have shifted back to being something like K2 billion per year,” he said.
“That is a substantial amount to be paid and servicing the debt level.”
Barker said that was a challenge to the Government which led them to borrowing internationally with an interest rate of 8.37 per cent from the sovereign bond.
He said the Government was banking on getting good revenue from all the resource projects.

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