PAUL FLANAGAN | PNG Economics
Until last week, Papua New Guinea was the only country in the East Asia-Pacific region, and one of only a handful of countries worldwide, refusing to release its 2016 IMF Article IV report in which the International Monetary Fund (IMF) assesses each country’s economic health. The Bank of PNG (the reserve bank) offered six “critical issues” for refusing to release the IMF's review but recently changed its mind - KJ
A JUST released IMF report reveals the O'Neill government has overstated the growth rate of the PNG economy by 12.7% since its election in 2012.
There was a 5.9% overstatement in 2014 and a further 5.2% in 2015.
The IMF analysis indicates the PNG economy is K6.3 billion smaller in 2017 than claimed by the O’Neill government.
This means, according to the IMF, that the debt to GDP ratio is 33.5% - which is above the 30% limit set in PNG’s Fiscal Responsibility Act.
The greatest concerns about economic management relate to the Bank of PNG's control of the foreign exchange rate and reserves, with more breaches of international norms than previously admitted.
While commending the government for its actions in the 2016 supplementary budget and a "prudent" 2017 budget, the IMF expressed a number of concerns.
These included the areas in which expenditure cuts have been made, the lack of effort to raise revenue (particularly from the resource sector) and the need to improve public financial management.
The IMF also said that structural reforms need to be accelerated for private sector development and expressed concerns about elements of policy in relation to small-medium sized enterprises.
The IMF’s forecast is that short-term risks are tilted to the downside, although there are medium-term prospects of further resource projects that may balance this out.
Fortunately for the country's credibility, and after a foolish delay which reflected badly on the judgments of the prime minister, treasurer and BPNG governor, the government has agreed to the release of the IMF Article IV assessment.
Even if countries disagree with IMF assessments the accepted international norm is that they release them along with their own alternative views.