THE NUMBERS DONT LIE PETER O'NIELL
Prime Minister Peter O’Neill is telling us that the economy and government finances are in good condition.
But the official numbers from Treasury and the Bank of Papua New Guinea tell a different story.
They tell us that Papua New Guinea is rushing towards an economic and financial disaster.
The numbers do not lie, unlike the Prime Minister.
Since he grabbed power in mid-2011, the economy and government finances have got worse and worse until today the Government is virtually bankrupt.
Now the Prime Minister and his partners in crime have resorted to stealing from State-Owned Enterprises to try to prevent a complete financial crash. They have demanded hundreds of millions of kina, including from LNG landowners’ funds held in NPCP and reserve and operating cash from National Fisheries Authority and MVIL. This is in addition to the hundreds of millions of kina already drained from SOEs last year and earlier this year in fake “dividends”.
O’Neill’s corruption, waste and mismanagement are like a sickness eating away at the heart of the nation. Papua New Guineans can longer rely on the institutions of state to protect their funds. Even the Bank of Papua New Guinea and the Internal Revenue Commission have been corrupted and now willingly co-operate in the abuse of due process and the circumvention of the laws of Papua New Guinea.
The Bank of Papua New Guinea’s failure to protect the financial system from the Prime Minister’s corruption and mismanagement has played a significant role in the current crisis. As the attached charts show, the value of the kina against the US dollar has fallen by about one-third during the past two years of O’Neill’s Prime Ministership (Graph 1), and foreign reserves have fallen by almost half (Graph 2).
O’ Neill and his cronies and spin doctors have described these numbers as good for Papua New Guinea. In fact they are very bad for Papua New Guinea.
The fall in foreign exchange reserves means the nation is running out of money to buy imports, which in turn is causing a severe business slowdown. According to the Bank of Papua New Guinea, employment fell by about 3% in the past 12 months, and is expected to decline even further for the rest of the year.
As a result of O’Neill’s mismanagement, more and more middle-class Papua New Guineans in urban centres will have no money to support their families. Food, clothing, housing and power and water will be even further out of reach of people who struggle to live on an honest wage.
The imports that Papua New Guinea relies upon, especially essentials such as food, clothing, and consumer goods will become harder and harder to buy and more expensive.
Domestic producers will struggle to replace imports, and their prices – especially for food - are also likely to rise.
The recent O’Neill Government decision to ban frozen chicken and fruit and vegetable imports was taken not for any planned import replacement strategy. It was taken because it would help to reduce pressure on foreign reserves.
In fact the only people likely to benefit are the big business cronies of the Prime Minister and other politicians. For example the Israeli LR Group, run by the son of his chief advisor Jakob Weiss, owns the Nine Mile vegetable farm. LR Group will make millions of kina from the decision.
Economic mismanagement by O’Neill is in fact far worse than that characterized by Australian academic Paul Flanagan, writing in Development Policy Blog. That is demonstrated in the numbers revealed in the Treasury’s Mid-Year Economic and Fiscal Out look document, released recently. The Treasury, like Flanagan, tells it like it really is.
MYEFO estimates that PNG’s debt is likely to rise to 41.3% of GDP this year, another shocking indication of O’Neill’s incompetence, and a reflection of his willingness to break PNG’s laws whenever it suits him.
The maximum level of debt permitted under the Fiscal Responsibility Act is 35%.
The Prime Minister himself says that Papua New Guinea’s debt to GDP ratio currently “runs at around 33 per cent of GDP so is below the Financial Responsibilities Act requirement.”
But once again there is a difference between the truth and what the Prime Minister says.
What O’Neill is keeping secret from Papua New Guineans is that total public debt is in fact much higher than the limit permitted by the Fiscal Responsibility Act.
When the country’s commercial and other debt is included – for example the Prime Minister’s illegal K3 billion UBS loan, debts owed by SOEs and the State’s contingent liabilities such as superannuation arrears and court judgments – the O’Neill Government is in breach of the Act.
The Word Bank-IMF estimate that superannuation arrears are about 6.5% of GDP and SOE liabilities at 7.5% of GDP.
And while it is well known that the illegal UBS loan is off-balance-sheet and therefore not counted as part of the debt-GDP ration, no-one knows what the situation is with the K6 billion Chinese EXIM Bank loan, which is to be used for project funding.
If funds are or have been drawn down by SOEs or other similar agencies, then that money will also be off-balance-sheet and again not part of the debt-GDP ratio.
One estimate (Graph 3), by the prominent economic research firm Trading Economics, puts total debt at 38% of GDP – which on the figures above appears to be an extremely conservative number. If the figures given above are correct, a worst-case scenario would put debt at about 50% of GDP.
All these financial and economic facts, in contrast to the lies told by the Prime Minister, are the main reasons for Moody's Investors Service this year rating Papua New Guinea as B1 and changing the rating outlook to negative from stable.
A B1 rating means the country is non-prime and judged as being speculative and a high credit risk.
It is getting to the stage now when every time the Prime Minister opens his mouth, a lie comes out.
The problem is that although everyone knows he is a liar, no-one knows how big his lies actually are because his Government keeps details of all these illegal loans and liabilities secret.
The debts and other liabilities of SOEs are kept secret by the simple method of not publishing their accounts – almost every SOE fails to produce its accounts so that the public cannot even guess t how much is being stolen, mismanaged or wasted.
Under Minister Ben Micah, SOEs have become a private feeding trough for the Prime Minister and his fellow politicians and cronies. The political feeding frenzy will get worse when all SOEs are brought under the House of Kumul and the new Sovereign Wealth Fund begins operations.
The Bank of Papua New Guinea these days is just as bad as the corrupt SOEs. It is withholding its statistics to hide the effects of its own corrupt behavior and the corrupt behavior of the Prime Minister and his Government.
For example, on its web site the latest Quarterly Economic Bulletin is for March 2015. The latest Monthly Economic Review Report is for June 2015. The latest Annual Monetary Statement is for March 2015. The latest Budget Commentary is for 2006. The latest Fortnightly Statistics is for April 2015.
Rather than an agency committed to transparency and accountability in the public and national interest, the central bank of Papua New Guinea has become a part of the O’Neill corruption machine.
O’Neill and various cronies and parasites who rely on him to survive have attacked Flanagan and others for their responsible, accurate, fair and factual reporting of Papua New Guinea’s financial and economic meltdown.
The problem for the Prime Minister and his cronies and parasites is that the facts expose their corruption, their greed, their lies, their incompetence and their self-interest.