The writers: Iriani Wanma - the intricate skills of writing for children
Cr Ingrid supports female authors in Papua New Guinea

PNG economy on the slide & media don’t seem to understand


MY third and final analysis of Papua New Guinea’s 2016 Article IV report from the International Monetary Fund focuses on fiscal and monetary policy.

The two previous explorations focused on PNG's growth rate being much lower than claimed by the O'Neill government and PNG's weak external position.

The IMF report estimated the 2016 budget deficit will be K628 million greater than estimated by the government (thus reaching 4.4% of GDP), which feeds into greater debt levels.

Government debt at the end of 2016 was estimated to be K967.3 million greater than stated by the government, and this did not include build-ups in off-budget debt such as the K3 billion in borrowings for Oil Search shares.

While commending the government for its actions in the 2016 supplementary budget and ‘prudent’ 2017 budget, the report had concerns about where expenditure cuts have been made, the lack of effort on raising revenues (in particular from the resource sector), and the need to improve public financial management.

It is worth noting that the IMF appeared not to have been fully informed of the central bank’s printing of money through back-stopping government auctions.

I can understand why the government tried to suppress this report by an independent umpire.

The IMF provided a few positive comments on high level fiscal policy, but overall, it was a pretty damning report about the O'Neill government's economic mismanagement.

Overall, there are significant gaps between the stories of the O'Neill government and the information provided by the IMF. These go to the heart of whether the people can trust the government.

Based on the IMF report, I have previously detailed how the 2016 budget deficit is likely to be K628 million bigger than the people have been told. Government debt is nearly a billion kina bigger - and that doesn't include debt being hidden off-budget.

Economic growth is 12.7% lower than claimed. The economy is K6.3 billion smaller. The government debt to GDP ratio at 33.5% exceeds the legal limit. Expenditure cuts are too severe and being made in the wrong places.

More could be done to get a decent return to the people of PNG from their resources. PNG's external position is weak, with import coverage only about one-third of the recommended levels despite the foreign exchange restrictions.

It is interesting that PNG's major local newspapers have not covered the outcomes of the IMF report on PNG but did so for the recent IMF report on Australia.

Something is wrong about this reporting, and it also goes to the heart of trust.


Feed You can follow this conversation by subscribing to the comment feed for this post.

Lindsay F Bond

As said of ‘status quo’
meaning forms sensible
and scene as judicial
politic and trade flow

bisnes wants certainties
less commercial doubts
too bad if govman debts
forms profit pleasantries

viewed measures singular
lukim non-resource GDP
silence gripped news media
image-clipped commedia
wield no weal of PNG
reports stretched peculiar

strongim bias urban
looks multiple treasures
brooks singular measures
wrongs beyond suburban

as sad of ‘status quo’
per capita saddingly
spend less a slight to see
politic and trade blo.

Paul Flanagan

Hi Lindsay - Thanks for the comment. On the bias against the rural poor, you may be interested in a longer piece covering this issue on PNG's 41st Independence Day (

On the legal debt limit, this is set in PNG's Fiscal Responsibility Act. This sets a limit on the level of general government debt to Gross Domestic Product of 30 percent from 2016 onwards.

The government has worked hard to give the appearance that it is under this legal limit (it claims the figure is 29.4 percent). It does this in part by understating general government debt, placing debt off-budget, but also exaggerating GDP growth rates.

The IMF confirms fears that even on narrow definitions the legal debt limit is 33.5 percent, so above the legal limit.

On the translation - I'm good with numbers and much less so with words. Keith is obviously doing a sterling performance in translating some of my more technical and long-winded arguments to a larger audience. More PNG voices doing the same would be welcome.

Chris Overland

Paul is pointing to the utterly egregious failure of the PNG media to actually hold the government to account.

On the face of it this is either an act of editorial policy or a profound ignorance of what is going on or a mixture of both.

History strongly suggests that the political class will do nothing to challenge the status quo until utter catastrophe ensues. Then, the responsible politicians either go to well deserved oblivion or, much more commonly, begin large scale blame shifting.

The old favourite, trotted out since time immemorial, is that "external conditions beyond our control" caused the problems. This is often coupled with that old stand by of blaming a preceding government.

In Australia, we have a government in complete denial about the monstrous housing asset bubble that it, together with the Reserve Bank, has now created.

They (and the Opposition) are also in denial about the necessity for root and branch reform of the economy to equip it (and us) to adapt to a highly uncertain future. Basically, too many interest groups with a profound commitment to the status quo hold far too much power in both major parties.

PNG is in a similar position, albeit for slightly different reasons. All those pigs with their snouts firmly in the public trough won't willing remove themselves, especially the politicians and their fellow travellers.

The marvellously informative book, The Big Short, showed how, amongst other things, people benefiting from what they know to be a clearly corrupt and unsustainable system will simply keep going until the entire thing collapses.

Basically, they bet that they can escape the inevitable economic carnage with enough wealth intact to make it worthwhile. A few of them are right, but most are wrong. They are indifferent to the fate of the millions who are dragged down in the collapse.

In my assessment, the bets have been placed across the globe and the players are now waiting to see how the cards fall.

So we collectively careen onwards to economic disaster, with those on the bridges of our respective ships of state being both unable and unwilling to do anything to change course.

Lindsay F Bond

Bias economically against "rural poor cash croppers" surprisingly favouring that cohort vacationing abroad or investing offshore or shady bisnis?

So what is the meaning of the word "legal" where commentators write:
"...government debt to GDP ratio at 33.5% exceeds the legal limit..." and
"additional borrowing which will likely continue to violate the legal ceiling".

How to translate mani spik into voter tok?

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)