PNGBLOGS

by MICHAEL JOSEPH PASSINGAN On 17 March PNG Blogs revealed that Peter O’Neill has secretly begged the World Bank for a loan of up to K1 billion. On 22 March we revealed that international agencies are about to downgrade Papua New Guinea’s credit rating once again – after already being downgraded late last year. Now some good news – the economy and national finances have been damaged so badly by O’Neill’s reckless borrowing and wasteful spending that his proposed $US1 billion sovereign bond issue is dead - D.E.A.D. This is good news because it means the nation’s indebtedness will not increase by $US1 billion in the immediate future. It means the long-suffering people will not have more debt to repay each year. IT MEANS THERE WON’T BE $US1 BILLION FOR O’NEILL TO STEAL AND WASTE The failure of the bond issue proves that international money markets won’t lend a toea to O’Neill’s corrupt regime unless it is at unaffordable penalty interest rates. Such unaffordable interest

by MICHAEL JOSEPH PASSINGAN The foreign banking system is bringing more bad news for Papua New Guineans suffering under the corruption, waste and reckless financial and economic management of the O’Neill Regime. The International Monetary Fund, an arm of the World Bank, is lending almost K1 billion so commercial banks – BSP plus the two main foreign-owned banks ANZ and Westpac – can prop up the bankrupt government of Peter O’Neill. The fact that the IMF is a lender of last resort to failed economies illustrates exactly how bad the nation’s economic and financial problems are. The fact that the O’Neill Regime and the Bank of Papua New Guinea are keeping this loan secret adds to the fears that is a very bad deal for Papua New Guinea. The K1 billion, to be managed by the central bank, will allow the commercial banks to continue to buy government investments such as Treasury Bills, Inscribed Stock and Central Bank Bills, and possibly lend more money to State-Owned Enterprises.

by JACK NAIME Another independent international assessment of Papua New Guinea’s financial management has contradicted the spin and deception by Prime Minister Peter O’Neill, Treasury Secretary Daire Vele and the mainstream media led by the Post-Courier. The report, Poor Financial Management in PNG: Can It Be Turned Around? Is available here: http://devpolicy.org/pngs-financial-management-can-it-be-turned-around-20160112/ . It was written by PFMConnect, a respected international consultancy specialising in developing country financial management. The report slams the O’Neill Government’s financial management and reinforces the criticism of other independent international observers who have exposed the corruption, incompetence and waste that is rife under Peter O’Neill and Daire Vele. Papua New Guinea ranks 21st out of the 24 assessments of Public Financial Management conducted by the IMF last year, according to the report. Most alarming is the fact that under Mr O’N

by PAUL FLANAGAN PNG is a high-taxing and very high-spending country relative to its Asia Pacific peers . Most of any adjustment to the fiscal balance should therefore occur on the expenditure side. PNG is planning to do this with a drop in the expenditure to GDP ratio from the highest level ever, of 38.1% in 2013, to its lowest level ever, of 24.6% in 2020. PNG has never attempted such a fiscal consolidation – not even to recover from the fiscal crises of the 1990s. Putting this into an international perspective, PNG is seeking to adjust government expenditure by 13.5% of the economy. This is more than double the government expenditure reductions undertaken by  Greece  of 6.3% (from 51.4% of GDP in 2010 to 45.1% of GDP in 2015). Of course, PNG is not facing a Greek-style fiscal crisis (at the start of its crisis Greece had a broadly similar deficit of 11%, but a much higher public debt level of 170% of GDP), but it is planning a similar or more draconian response. PNG is seekin

by PAUL FLANAGAN   Papua New Guinea’s budget , released on 3 November and rushed through Parliament the same day, could have been so much better. Given the country’s record deficit levels, fiscal consolidation was vital even before the fall in international commodity prices. However, the proposed expenditure cuts do not match the government’s stated priorities of protecting health, education and infrastructure. They are also excessive – even more than those imposed on Greece as part of its structural adjustment program. Further, the budget suffers from factual errors relating to GDP and the external accounts, a lack of revenue effort, and inadequate transparency. This is the first of two posts providing a detailed analysis of the 2016 PNG Budget. GDP errors The budget makes a serious error in calculating PNG’s nominal GDP – and this affects all the key ratios and messaging from the budget. The nominal GDP budget estimates assume there has been no fall in LNG