"The future of Papua New Guinea children has been mortgaged in huge Debt like never before in PNG’s history. Accumulation of K20 Billion in 36 months, effectively means Papua New Guinea is incurring K579 million debt every month." - Kessy Sawang
PAPUA NEW GUINEA REACHED K20 BILLION EXTRA DEBT IN 30 MONTHS.
By: Kessy Sawang | Vincent Moses | 04 Feb. 2021.
Many of you may not have read nor understood our country’s economic books and statistics. So I thought I’ll highlight some critical issues, the first one being Debt.
Let me first clarify that I’m a nationalistic blogger critical about issues of good governance, social justice and economic management of our country. My activism using social media and blogging platforms started over 10 years ago, holding whoever in our Executive Government, power and authority accountable. After all, that is our Constitutional right.
Three (3) years ago, I published an article in the Sunday Chronicle Newspaper titled “Addicted to Debt”. At that time, citizens were very critical of then Prime Minister Peter O’Neill [PMPO] Government for borrowing.
At that time, the Fiscal Responsibility Act [FRA] legal limit for borrowing was only 30% of GDP. We activists demonized former PMPO Government for amending the FRA to increase the Debt to GDP ratio to 35%.
I had my voice on being very critical of the Government for breaching the FRA 30% then. You can find the online version of my “Addicted to Debt” article here: https://pngwoman.com/debt-addiction.
We had a change of Government in the May 2019 Vote of No Confidence [VONC]. Citizens’ cries over our “dinau” situation was very critical that the new Government was expected to manage Debt at sustainable levels. What did PM Marape’s government do, right after it resumed office?
These are FACTS from the Government’s own books:
1. Marape Government immediately amended the FRA to increase the Debt to GDP Ratio from the highly criticized 35% to 45%. According to the Treasurer, so it can allow them to borrow more.
2. In 2019, Marape Government increased domestic debt from K16.9 Billion to K19.3 Billion and external debt from K9.9 Billion to K14.3 Billion. In just 7 short months, Marape borrowed K 8 Billion. Note that this is before Covid19.
3. Note that our total national debt end of 2018 was K25.6 Billion [see Treasury Final Budget Outcome Reports] within a conservative FRA legal limit of 35%.
4. In 2020, Marape Government increased domestic borrowing to K21.3 Billion and external borrowing to K18.6 Billion. This is a further increase of Debt by K6.2 Billion. This takes our national debt from K33.6 Billion to K39.8 Billion.
5. In 18 months [May 2019 – December 2020], Marape Government borrowed an extra K14.3 Billion. This increased our Debt from K25.6 Billion incurred by previous regime in 8 years to K39.9 Billion.
6. Before passing the 2021 Budget, the Marape Government again amended the Fiscal Responsibility Act to increase the Debt to GDP Ratio from 45% to 60%. This gave the Government the fiscal space to increases our National Debt to K46.5 Billion – a 51.5% Debt to GDP.
7. The high expenditure 2021 Budget is a K6.6 Billion Deficit Budget. This significant expansion of Debt is planned to be financed through:
(a) External borrowing of K4.6 Billion [of which K2.4 Billion will be on concessional terms and K2.2 Billion “yet to be identified”]. Treasurer boasts about cheap loans but external financing should be a temporary solution. Note also that conditions for concessional loans are pre-determined.
(b) Domestic borrowing of K2 Billion through issuing of Government securities. As explained in my 2017 article, domestic borrowing comes at high costs as all Government securities must be held to maturity and cannot be traded. Thus, domestic public debt has a narrow investor base confined to the superannuation funds and financial institutions.
8. The costs of borrowing [interest costs] is a further K2.2 Billion, representing 12% of the 2021 Budget.
9. The huge expansion of Debt by Marape Government is to fund the re-current expenditure, rather than capital investments in economic projects that would generate economic returns for sustained growth. Long tokpisin bai mi tok olsem “dinau em dai mani – nogat win moni or profit blo em”.
10. We cannot blame the situation on Covid19 alone. First, Covid19 is both an economic and health emergency that did not have an “appropriate” policy. As a result, millions on taxpayer funds or dinau moni which we will repay has been squandered on things like finding a cure, and K600 Million on Covid19. The people of Papua New Guinea deserve to see proper accountability of Covid19 funds.
11. Covid19 pandemic and the closure of Porgera Mine affected the Papua New Guinea economy severely, resulting in a negative growth of -3.8% [from a 6% growth rate previously]. Of this, Porgera closure accounted for -1.3% [significant!]. Timing was foolish. Alas, the short term pain has prolonged into months with long-term gain not in sight sooner.
Consequence: The future of Papua New Guinea children has been mortgaged in huge Debt like never before in PNG’s history. Accumulation of K20 Billion in 36 months, effectively means Papua New Guinea is incurring K579 million debt every month.
As a person who has been very vocal about the last Government’s debt, today I hang my head in shame. The new Government that we had high hopes on has placed us in more devastating debt burdens like never before in PNG’s history.
Continuous reliance on the resource sector has more uncertainty. Poor governance issues like abusing of power for private gains [eg, giving jobs to cronies church singing group member getting K236 Million inflated road contract, K10.2 Million controversial Coronavirus cure, dishing out cheques at Loloata Island camp, et al] are serious red flags that citizens must hold Government accountable.
Our emotions have been enticed by lovey dovey sermons and blind resource nationalism. We’ve been believing in lies when numbers don’t lie.
Online nationalism is fine, but please take some time to read the Government’s own story as told by the Government’s own official statistics prepared by professional bureaucrats – not enticing words of politicians to win your favor.