The National, Thursday May 21st, 2015
TREASURY Secretary Dairi Vele (pictured) said yesterday that Moodys Investor Service rating has reaffirmed Papua New Guinea’s B1 rating, although it has changed the outlook to negative from stable.
He said maintaining the overall B1 foreign currency and local currency issuer ratings was a positive outcome in the face of the drastic fall in global commodity prices that has impacted on many countries.
“The reality is that a whole world is undergoing a rebalancing in reaction to the downturn in global commodity prices,” Vele said.
“We in Papua New Guinea are not immune to the world pricing landscape and have commenced the process of reviewing where we are and what we need to amend to achieve the growth, stability and prosperity that we have enjoyed over the last 14 years.”
He said the Moodys review further noted that while Government debt has risen, Papua New Guinea has one of the lowest debt burdens among B1-rated countries, while debt consolidation over recent years and the sourcing of local credit has provided a buffer from external financial shocks.
“We are in a better position than many of our competitors as our economy was on a strong upswing when the effects of the commodity price decline began to be felt.
“What gives us great confidence is that the fundamentals of our economy that we have been able to leverage over the last 14 years and in particular over the last seven years with the construction of the PNG LNG project are extremely strong.
“Our project was built when the price of oil was US$100 (K273) a barrel and I can assure you that I would much rather be in our position than others who are trying to build their resource projects now in this climate.”
Vele added that inflation remained low and stable.
“Our growth outlook will lead the region again for the sixth successive year. But this is not to say there are some major challenges,” he said.
“We are managing the changes in revenue through savings and deferring expenditure where this is possible.
“The Budget Review is in train and consultations will soon be held with the departments as to see where the cuts will be made.
“We will ensure that essential services and infrastructure commitments are met but that we live within the means necessary given the current circumstances.”
He said that the increase in the debt level is temporary as new infrastructure nears completion, and
debt will reduce as older debt is retired.
“As a government, we are determined to restore the vital infrastructure of our country, and if this causes a temporary increase in debt that is a fair trade-off for restoring services to the people.
“The main issue is of-course that we are putting our debt programme to address the productive areas of our economy.
“We are focusing on enabling infrastructure and ensuring that we are touching the lives of our people. That is the hallmark of the O’Neil administration,” Vele said.
He said while maintaining stability in the exchange rate had been a challenge, the measures implemented by the BPNG were meeting their intended policy aim.
“BPNG aimed to bring some stability to the cost of foreign exchange transactions and reduce the risk posed by currency speculators who can use vast amounts of capital to profiteer from our economy,” he said.
“After the initial noise, I can honestly say that all stakeholders are working towards a progressive and stable foreign exchange controls regime.”