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IMF analysis shows PNG has overstated economic growth

PNG's overstated growth ratePAUL 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.

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Chris Overland

If a private company had behaved in the way the O'Neill government has by inflating its turnover figures to deceive the market, the directors would be subject to arrest and prosecution.

There is a big difference between marginal manipulation of national income figures to minimise political disadvantage and simply presenting the most convenient number.

Not that the PNG government is alone in using "creative accounting" to put the best possible gloss on events.

Already, the Chinese government has discovered that much economic data forwarded to its central bank by regional CCP bosses has been fabricated to greatly inflate overall GDP figures.

Paul Flanagan refers to the "accepted international norm" being breached in PNG's case.

Unhappily for us all, a whole host of previously accepted international norms seem to no longer apply.

Thus, in the Philippines, we have a president who advocates extra judicial killings as a matter of public policy and who simply heaps contempt and derision upon those who criticise him.

Only a few months ago, the Chinese government simply rejected a ruling of the International Court of Justice that its occupancy of the Spratly Islands is unlawful.

It refused to recognise the court's jurisdiction and, as a consequence, several other authoritarian governments (notably in Africa) have joined it in also defying the court.

In the USA, President Trump simply ignores well established precedents about the proper use of the powers of his office, preferring to ride roughshod over accepted norms in pursuit of his political agenda.

So, PNG is hardly out of step with emergent international practice in manipulating official data or operating outside accepted conventions of democratic government.

None of this bodes well for the future. History shows that once a sufficient number of governments ignore established international legal and political conventions, war will follow.

That is now our collective trajectory and our political leaders seem unwilling or unable to do anything about it.

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