The clear plan set out by the Marape-Rosso Government for on-going budget repair means that the International Monetary Fund (IMF) and World Bank now consider Papua New Guinea’s debt levels to be sustainable.
“They are very clear that the only reason for the “sustainable” rating is because of the plans for further budget repair and using good, cheap concessional financing rather than expensive commercial loans” stated the Treasurer, Ian Ling-Stuckey.
“In contrast, the reason for PNG’s high debt risk rating is because of the reckless policies of the O’Neill/PNC administration. They are the ones that undertook an expensive Sovereign Bond raising of $US500 million at effective interest costs of over 8 per cent, all of which has to be repaid entirely in 2028.
The Treasurer said this caused a breach in the WB/IMF “Debt service-to-revenue ratio” that led to the high risk of external debt rating.
“What a foolish decision to go down that path. Loved by overseas investors but bad news for our people,” said Ling-Stuckey.
He added that the O’Neill/PNC administration left PNG’s debt to GDP ratio at 41.3% in 2019 according to the IMF Due Diligence work. That is in breach of the 35% ratio of public debt to GDP used in the World Bank/IMF Debt Sustainability Analysis.
“This started the high risk rating for public debt. Of course, they also left a budget deficit of 5.8 per cent of GDP according to the IMF. Even with major budget repair in reducing the budget deficit year after year, these budget deficits automatically increase debt.”