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Corruption of economic statistics: Treasurer versus Economist

Bulletin front pagePAUL FLANAGAN | Facebook | Edited extracts

CANBERRA - Late last Saturday evening, I was surprised to see Treasurer Charles Abel responding on Facebook to my recent blogs on the issue of the corruption of Papua New Guinea’s economic statistics.

The front page of PNG’s weekend paper, The Sunday Bulletin, featuring the headline ‘Economic Statistics Corrupted’, possibly contributed to the comments from the Treasurer.

Democracy thrives on discussion and debate and I congratulate The Sunday Bulletin for being brave enough to cover the issue.

The report on PNG Economics covering the issue, supported by analysis from other independent think tanks and universities, was worthy of a news article.

However, in an environment where there is clear pressure on the PNG media not to cover unfavourable stories about the O’Neill-Abel government, I can imagine the ferocity of the phone call from a certain advisor in the prime minister’s office and the threats that could be made.

What follows are Charles Abel’s original Facebook comment on my articles and my response to him.

Treasurer Abel’s Facebook comment

Paul there is no deliberate attempt to manipulate numbers. In fact we are working closely with the IMF (International Monetary Fund) and the World Bank in many financial reforms. This has resulted in a graduation back to budget support modality funding and a successful inaugural sovereign bond issue.

The IMF has changed the method of GDP calculation. Preliminary application of this method by the NSO has created a discrepancy with the Central Bank and Treasury numbers.

Queries of the application by NSO (PNG National Statistics Office) have led to acknowledgement by the IMF and ABS (Australian Bureau of Statistics) that the queries have basis and proper consultation is required before rule changes like this are finalised.

The NSO results are preliminary and final numbers will be published in February with the support of the IMF and Australian Bureau of Statistics.

Paul Flanagan’s response

Dear Treasurer. Thank you for responding as an exchange of ideas and perspectives is good for democracy.

With the utmost of respect, your opening paragraph fills me with concern. Of course, there have been attempts by the IMF, World Bank, ADB (Asian Development Bank) and others to try and reverse the decline in PNG's economic management - a decline documented in ratings over recent years that have moved PNG into being classified as the only APEC ‘fragile situation’ state.

However, it would seem as if this assistance is being given lip service at one level, but then ignored when faced with the realities of politics. The clearest example of this was your change to the Fiscal Responsibility Act in 2017 to move the primary budget deficit target to an average of zero (over the medium-term) of the non-resource fiscal balance as a share of non-resource GDP.

Agreement was given to the budget support loan on the basis of this target being included in your 2019 budget strategy - and before your 2019 budget figures were actually released. However, your 2019 didn't deliver on this commitment.

This was not a slight deviation - it was close to a billion kina of additional expenditure over what you had committed to as the first priority when PNG received the assistance.

There appears to be a track record for asking for assistance, accepting it when convenient, but then over-turning it during the rigour of the budget process. I discussed this characteristic of your last two budgets in a recent edition of the East Asia Forum.

When responding to a similar explanation as provided in your 2019 budget, I asked the question as to why the Treasury and Central Bank where happy with this changed methodology which covered 2007 to 2014? Why were they happy with the first eight years of changes, but unhappy with the ninth?

Yes there was an updated methodology and this had dramatic impacts in portraying the government's performance. Everyone seemed happy with this massive initial change.

However, when the same methodology produced an inconvenient number, it was not used, a committee was set up to examine the issue six months after the draft release, and it seems possible that updated numbers will be released nearly one year after the initial draft was released.

Anyway, your last sentence indicates that the ABS has returned to help with the updated figures. Could you please just confirm that the ABS has lifted its suspension of working with the NSO which the IMF documented as recently as December? With respect and always happy to discuss further.

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