PNG ECONOMIC STATISTICS CORRUPTED – RESPONSES TO TREASURER

The PNG Treasurer has provided inadequate responses to recent coverage of the corruption of PNG’s economic statistics.

Late on Saturday evening I was surprised that PNG Treasurer Charles Abel was responding directly on Facebook to my recent blogs on this issue. The front page of PNG’s weekend paper, the Sunday Bulletin, which featured with the heading “Economic Statistics Corrupted”, possibly contributed to the direct Facebook comments from the Treasurer. Later Facebook coverage highlighted an earlier response from the Treasurer.

Democracy thrives on discussion and debate. I congratulate ‘The Sunday Bulletin’ for being brave enough to cover the issue. The story is not “fake news” and the report from PNG Economics covering the issue, supported by analysis from other independent think tanks and universities, was worthy of a news article. However, in an environment where there is clear pressure on the PNG press not to cover unfavourable stories about the O’Neill/Abel government, I can imagine the ferocity of the phone call from a certain advisor in the Prime Minister’s office and the threats that could be made.

Following are the two responses I have from the PNG Treasurer, and my responses provided on Facebook over the weekend. Putting these in a single article will hopefully allow the discussion to continue – possibly allowing for some honest reflection on how to make for better statistics to inform better policy in PNG.

The two key elements of my responses are:

As the Treasurer indicates, the rules for calculating the size of the economy (GDP) were significantly changed. However, these changes occurred in 2017 and the government was very happy with these new rules covering the first eight years (2007 to 2014) which led to major increases in measured GDP. They immediately built the new figures into their economic policies. However, using the same rules, the 2015 figures published in March 2018 were politically inconvenient for they showed the non-resource economy in a severe recession (negative growth) and risked breaking the legislated debt to GDP target. The Treasurer only cries foul and sends the rules off for further examination when they don’t suit his political story. If the 2015 GDP numbers was the first release under the new rules then I could understand the argument. But to only object to the ninth year indicates other motives.
The Treasurer tries to validate his approach by referring to the support from the IMF and ABS, and implying that they agree there is a major problem. However, the ABS has quietly walked away from the fiasco and latest reports indicates it has suspended its technical assistance report. The IMF continues to release the original numbers from the NSO/ABS/IMF March 2018 report despite requests from the government not to do so. The Treasurer’s international friends have left him on this issue. They don’t like getting involved in what amounts to the corruption of PNG’s statistics.
Following are the two complete Facebook discussions covering the statistics. I’ve included comments from others that also participated. The first response was immediately following my fourth blog exploring the four motives behind the corruption of PNG’s economic statistics. The response covers two paragraphs and I respond separately to those. The second response from Abel was included as as “conversation starter” on Paitum Garamat on Sunday 3 February. It included the front page of the Sunday Bulletin. I’m not sure when Treasurer Abel made the specific comments or which article he was responding to – but they have been relayed to me from several sources.

1. Treasurer Abel’s response on Facebook (Sharp Talk Saturday 2 February).
Charles Abel Paul there is no deliberate attempt to manipulate numbers. In fact we are working closely with the IMF and the World Bank in many dinancial reforms. This has resulted in a graduation back to budget support modality funding and a successful inaugural sovereign bond issue.

The IMF has changed the method of GDP calculation. Preliminary application of this method by the NSO has created a discrepancy with the Central Bank and Treasury numbers. Queries of the application by NSO have lead to acknowledgement by the IMF and ABS that the queries have basis and proper consultation is required before rule changes like this are finalised. The NSO results are preliminary and final numbers will be published in February with the support of the IMF and Australian Bureau of Statistics.

Paul Flan Dear Treasurer. Thank you for responding as an exchange of ideas and perspectives is good for democracy. With the utmost of respect, your opening paragraph fills me with concern (I will comment on the second paragraph shortly). Of course, there have been attempts by the IMF, World Bank, ADB and others to try and reverse the decline in PNG’s economic management – a decline documented in ratings over recent years that have moved PNG into being classified as the only APEC “fragile situation” state. However, it would seems as if this assistance is being given lip service at one level, but then ignored when faced with the realities of politics. The clearest example of this was your change to the Fiscal Responsibility Act in 2017 to move the primary budget deficit target to an average of zero (over the medium-term) of the non-resource fiscal balance as a share of non-resource GDP. Agreement was given to the budget support loan on the basis of this target being included in your 2019 Budget Strategy – and before your 2019 Budget figures were actually released. However, your 2019 didn’t deliver on this commitment. This was not a slight deviation – it was close to a billion Kina of additional expenditure over what you had committed to as the first priority when PNG received the assistance. There appears to be a track record for asking for assistance, accepting it when convenient, but then over-turning it during the rigour of the budget process. I discussed this characteristic of your last two budgets in a recent edition of the East Asia Forum.

Paul Flan In response to your second paragraph, I just highlight that three earlier articles (see pngeconomics.org as well as on Sharp Talk) have gone into some additional background. When responding to a similar explanation as provided in your 2019 Budget, I asked the question as to why the Treasury and Central Bank where happy with this changed methodology which covered 2007 to 2014? Why were they happy with the first eight years of changes, but unhappy with the ninth? Yes there was an updated methodology and this had dramatic impacts in portraying the government’s performance – the move from the orange line down to the red line. Everyone seemed happy with this massive initial change. However, when the same methodology produced an inconvenient number, it is not used, a committee is set up to examine the issue six months after the draft release, and it seems possible that updated numbers will be released nearly one year after the initial draft was released. Anyway, your last sentence indicates that the ABS has returned to help with the updated figures. Could you please just confirm that the ABS has lifted its suspension of working with the NSO which the IMF documented as recently as December? With respect and always happy to discuss further.

2. Treasurer Abel’s response copied on Facebook (Paitim Garamat Sunday 3 February)

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