Papua New Guinea Treasurer | Edited extracts
PORT MORESBY - Peter O’Neill does shame to his role as former prime minister by continuing to lie to the country about his economic legacy.
During the years of his autocratic rule, he produced fake budgets, fake national accounts and fake growth figures.
I had hoped that, when he was caught out for his fraudulent behaviour and deceptions through the due diligence exercise and confirmed by the independent International Monetary Fund, at least he might stop lying to the people of this nation.
No, some people just can’t stop telling lies and are willing to manipulate the truth for the sake of their own political agenda. Such behaviour is in stark contrast to the honesty and transparency of the Marape-Steven government.
O’Neill dragged Papua New Guinea into a debt trap. His economic mismanagement increased PNG’s debt by 435% from K8.5 billion to K37 billion. He says total debt was K27 billion, but this is a lie.
But there is even more. We are finding extra hidden loans he put into state owned enterprises. Kumul Consolidated Holdings show a further K1,285 million in commercial loans. One of these loans was a massive K225 million from Bank South Pacific to pay a forced dividend to the state, even though Kumuk clearly did not have the money. This is probably illegal.
There is another K470 million of loans for the massively overpriced Motokea Port and this is on top of K600 million now recognised as part of public debt. So that relocation cost over K1,070 million. And these figures do not include further debts still in Kumul Minerals and Kumul Petroleum.
So, at a minimum, O’Neill’s debt legacy was K36,952 million – nearly K37 billion.
It is extraordinary that under O’Neill’s years of economic mismanagement, debt increased by 435%. It was K8,485.6 million when he started and K28,466 million higher when he was finally kicked out of office.
Now he has the hypocrisy to criticise the actions of the Marape-Steven government to get out of this extraordinary debt hole he has dug for this nation. True, over the next five years debt is expected to increase further – but only by 29% as we bring tings back under control.
PNG is now on a path of budget consolidation to get out of O’Neill’s debt hole. The public debt to GDP ratio will fall from 42% inherited from O’Neill to 38% by 2024.
Because it would be economically reckless to immediately return to a surplus budget, there will be a continued build-up in public debt. But the size of the budget deficits will be reduced rapidly – from K4,631 million in 2020 to K2,425 million in 2022.
Importantly, the quality of spending is also being changed. The development budget, including our public investment program, is projected to grow from K4,715 million in 2019 to K8,585 million. As a share of the budget, it will increase from 28% to 41%.
This government is about more responsible expenditure with lower budget deficits and it is also about spending money better through development programs and less through public service wages and goods and services.
This is in stark contrast to the O’Neill years when there were constant cuts to the development budget and an inability to control public service costs.
O’Neill has claimed that the K3.8 billion in external financing we are discussing is new debt. In fact, half is simply rolling over existing external loans at a lower interest rate. So that K1.9 billion doesn’t add to debt.
The other K1.9 billion does add to debt, but in a totally different way to the O’Neill legacy. The expected interest cost of the Australian borrowing is around 2.5%. What a contrast to 8.375%. And K990 million is expected from a syndicated borrowing organised by the Asian Development Bank. No need for dodgy fees and commissions.
Overall, the debt cost is expected to be four percentage points lower than the commercial borrowings undertaken by O’Neill. These funds will be linked to ongoing economic reforms, especially important reforms for our state owned enterprises.
So, despite O’Neill’s lies about the K3.8 billion funding, half goes to repaying previous debt and all is good, cheap financing – most of it expected at an interest rate of 2.5%.
Far from being a debt trap, this is debt liberation from 435% to a planned 29%. Good cheap financing is part of our economic reform program to get out of O’Neill’s budget hole, his growth hole and his foreign exchange hole.
I’m Treasurer and a proud PNG business leader, with a diversified family business built up over nearly 80 years. History will judge our economic management record. O’Neill’s was a great big fail.
I’m sure I will do better, and the international community also believes this to be the case. This is why they are backing our home grown reform program.
This would all have been so much easier to accomplish if we did not have to deal with the fake budgets of previous years that led to such a major increase in debt and unsustainable budget deficit levels.
Hon Ian Ling-Stuckey CMG MP is Minister for Treasury in the Marape Government