“Treasurer Basil seems to be extremely confused about PNG’s true debt levels and the requirements of the Fiscal Responsibility Act (FRA). The Treasurer needs to stop fiddling the books so we can honestly accept how bad things have become, for the first step in moving forward is accurately knowing where we are” stated the Shadow Treasurer, the Hon. Ian Ling-Stuckey.
“Treasurer Basil, stop fiddling the books by delaying the recognition of bad debts on at least the Motukea Port of K600m, on the Solwara 1 fiasco of K375m, and on the NCD roads disgrace of K560m. The definition of ‘general government debt’ under the FRA is “all borrowings that require future payment of interest and/or principal by the Government to a creditor”. The Government is already paying the interest costs on these loans to a creditor (BSP). Under the FRA, they clearly should be included as part of general government debt. Why doesn’t the Treasurer include them when the relevant Parliamentary Act is very clear that they should be included?
“Treasurer Basil, stop fiddling the books on the K1,480 million increase in general government debt since 2015 due to valuation effects. PNG firms are required to update the values of all monetary assets (such as debt) at the latest official exchange rate at the end of the relevant financial year. The Treasurer doesn’t understand that non-monetary assets can use “book” value, but that monetary assets must use fair value including the latest foreign exchange rates. Firms also are dealing with revenue and expenditure yet they can include a line on valuation effects when explaining movements in debt. Why should Treasurer Basil propose accounting standards for the government which are lower than the private sector?
“Treasurer Basil, please stop fiddling the books on measures of the size of the PNG economy, known as Gross Domestic Product or GDP. You are simply lying when you claim I used real or constant price GDP. As stated very clearly in my previous media release, I used the nominal GDP figure for 2018 from the PNG 2017 budget Table 1 (page 88). I used this table because you stated in Parliament that PNG’s debt to GDP figures would continue to use the Treasury methodology, and Table 1 in the 2017 Budget was the last time Treasury produced GDP figures before it started including NSO updates. Your latest partial economic update indicated that real growth had fallen 3.4% below expectations in 2018, and with no update on a price index, it was reasonable to apply this fall to the nominal GDP figure to get a figure of K60.2bn. Using the Treasurer’s stated preferred methodology, and the updates in general government debt, PNG’s debt to GDP ratio reached 50%. This is not rocket science, especially as my university studies included a major in applied mathematics. What did your studies include Treasurer?
“My view as Shadow Treasurer is that we should stop fiddling the books. This involves four steps. First, include all loans on which the government is paying interest to creditors consistent with the FRA. Second, include valuation effects on movements in monetary assets in the same way as PNG firms are required to do. These two steps lift general government debt in 2018 to K30bn. Third, stop playing games with the GDP figures and use all of the NSO updates including for years 2015 and 2016. Using the NSO nominal GDP base in 2016 and adjusting for the latest growth figures, the appropriate GDP figure for 2018 is estimated at K76.3bn. This means PNG’s debt to GDP ratio is at least 39.3%, clearly in breach of the 35% limit in the FRA. By acknowledging this reality we know we have to start taking more focused, faster and effective action than proposed by Treasurer Basil. Fourth, do a complete debt statement – there remain too many omissions on government arrears, non-payment of GST refunds, and other contingent liabilities that may actually be debt, as well as a lack of information promised to us by Treasurer Abel on the accounts of our SOEs and their potential huge debt overhang on the PNG economy.
“Treasurer Basil continues the previous PNC Treasurer’s practice of fiddling the books to try and tell a good story about how the PNC government had been performing. Treasurer Basil, please wake up. You are a Treasurer in a new Marape Government – you shouldn’t need to continue the lies and defend the economic mismanagement of the O’Neill/Abel years! The first necessary step in getting PNG out of its economic crisis is acknowledging the facts. You included many details in your recent statements, but you failed to make the sensible judgement calls, even if against the advice of the PNC appointed Treasury Secretary, as to what to include as government debt and what GDP figure to use. I see the same failures of judgement and attention to detail when hearing of your risky and reckless proposal to lift foreign commercial debt to 1,000 per cent higher than at any other time in our history. I do fear that many of PNG’s children will be left behind under the current economic management team” stated Mr Ling-Stuckey.
Shadow Minister for Treasury & Finance
14 July 2019