Opposition leader slams ‘unacceptable’ financial rating

Business, Normal

The National, Friday May 22nd, 2015

 THE latest Moody’s ranking of Papua New Guinea does not paint a good picture of the country, says Opposition leader Don Polye.

He said this yesterday after Moody’s Investors Services on Tuesday affirmed PNG’s B1 foreign currency and local currency issuer ratings and changed the rating outlook to negative from stable.

Moody’s said this was because of fiscal deterioration with Government debts rising to 37.7 per cent of GDP in 2014, and a weakened external payments system and increased external vulnerability.

“That’s really bad,” Polye said.

“To be honest, I’m very upset with this, because some of us helped to build Papua New Guinea’s finance rating up to B1 but now it’s coming backwards. 

“This is very bad because this is the time when we should be seeing positives in PNG with LNG exports and another LNG project coming up.

“Yet, for us to have a score of negative on the financial ratings is not acceptable.

“It’s unacceptable, it’s not right, we shouldn’t allow this.”

Polye said Moody’s had seen that PNG was building up a lot of debt which was now beyond 40 per cent of GDP and could not manage it “although there is a lot of money coming in”.

“The debt has led PNG to a situation where we cannot sustain our economic development programmes for the next medium term,” he said. “That has derailed our ratings.

“The other thing is that foreign reserves for the last two years have come down, depleted by almost half.

“I think it’s now down to K2 billion from K9 billion.

“When I was Treasurer, it was at the K9 billion mark, which is why I’ve been saying all the time about watching our debt level as it will deplete our foreign reserves, and you will find it very hard to finance these infrastructure developments.

“The kina exchange rate is now very artificial.

“The fiscal condition of PNG has deteriorated and we now have a very high debt level beyond 40 per cent and our foreign reserves have dropped down by more than half.”