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MOODY’S Investors Service last week upgraded the outlook on the government rating from "negative" to "stable."
The move from negative to stable is attributed to "a stabilisation in the Government's debt load coming in part from the positive terms of trade shock from better global prices for Papua New Guinea's commodities exports," according to the report.
A "renewed commitment to long-term fiscal sustainability that has been strengthened by its re-engagement with development partners" is another factor that contributed to it.
“Moody’s now expects a stable debt burden and debt affordability in the next few years,” a statement said.
“In addition, government liquidity and external vulnerability risks have ebbed given improvements in domestic funding conditions and the balance of payments, leading to lower domestic interest rates and higher foreign exchange reserves, respectively, which Moody’s expects to continue. The affirmation of the B2 rating reflects the confluence of relatively weak economic strength, institutions and governance strength, and susceptibility to event risk.
“Nonetheless, progress on large resource projects, particularly for liquefied natural gas (LNG), improve the outlook for medium-term growth and fiscal repair, while the re-election of the Government of Prime Minister James Marape allows for policy continuity and no meaningful deviation from the negotiations already conducted with regards to the large resource projects or with development partners and the International Monetary Fund (IMF).”
PNG's performance under several IMF staff-monitored programmes during the past two years, according to Treasurer Ian Ling-Stuckey, demonstrates a renewed emphasis on interaction with the international community. He also noted that PNG has exhibited progress on reforms.
According to Ling-Stuckey, the Government is now negotiating a new programme with the IMF's extended loan facility that is scheduled to begin in 2019.
“The shift towards more concessional funding sources and away from the PNG’s traditional reliance on domestic market-based financing will lower debt servicing costs and debt affordability, as well as bolster external stability,” he said.
Reference: The National (15 November 2022). “PNG outlook stable: Moody’s”.
