Main PNG parties diverge on economy

With Papua New Guinea's election fast approaching, divisions are widening between the two biggest political parties on management of the economy.

The leader of the second biggest party, the National Alliance, says it wants to steer government away from borrowing for non-essential infrastructure.

Patrick Pruaitch was removed as Treasurer by prime minister Peter O'Neill last month after saying PNG's economy had "fallen off a cliff" due to reckless spending.

With the election approaching, Mr O'Neill said government led by his People's National Congress party would continue borrowing for infrastructure projects.

Acknowledging PNG's economy was still recovering from depressed global conditions and damage caused by drought, the prime minister placed borrowing at the centre of his future plans.

"We borrow to build infrastructure, all countries have to, how else could we re-build the Highlands Highway, new Hospitals, schools and university campuses?" he asked.

"This vital infrastructure cannot be funded from the annual budget. We borrow at concessional rates and we pay the loans back on time."

However Mr Pruaitch said Mr O'Neill's borrowing patterns were leading PNG in the wrong direction.

Borrowing should be geared towards empowering the rural majority, and unlocking PNG's agriculture potential, he explained.

"If you borrow to finance infrastructure that will give you returns, then that is fine. But if you invest in roads that are leading nowhere, infrastructure that are not going to be used by most people, then it's not the way to borrow."

Trust and debt

National Alliance has been the second biggest party in the current parliament, and has been part of Mr O'Neill's coalition government since 2012.

Mr Pruaitch said they would work again in a coalition with the prime minister's People's National Congress, but not Mr O'Neill, who he described as untrustworthy.

"He'll tell you something today, and tomorrow he tells you something different, or he tells other people something different than what he told you," said Mr Pruaitch.

Meanwhile, in light of his May admission about the economy, Mr Pruaitch defended his own performance as Treasurer in the past three years.

"I was there making sure that the prime minister limits himself," he explained.

"I was able to rein in on two supplementary budgets to cut down our expenditure and realign the priorities of government. If I had not done that we would be far worse than what we are today."

Mr Pruaitch said the National Alliance was not inclined to take PNG further into debt.

"We don't want to go beyond the level accepted by the Fiscal Responsibility Act," he explained.

"Our party is more pro-foreign direct investment, inviting people to come on board, making sure that our major projects are getting off the ground. So we support revenue coming in to the country."

According to the Treasury's latest budget figures released in May, PNG's debt level stands at around 22 billion Kina or 6.7 billion US dollars.

However large state loans not included on the budget record, such as a US$1.8 billion China Exim Bank loan and a US$900 million UBS loan, were taken up by state-owned companies rather than the government.

PNG's true debt level may be closer to 30 billion kina or US$9 billion.

But despite a growing chorus of concern about his fiscal management from critics such as opposition leader Don Polye, the prime minister remained upbeat about the economy and the debt level.

"By global standards we are amongst the lowest debt to GDP ratio countries in the world. Many similar size economies are three and four times that ratio," said Mr O'Neill.

"When it comes to the economy, we are in a stronger position than we were five years ago, and our economy is still growing."