PNG high risk of debt distress: ADB Report

Papua New Guinea is one of the countries in the Pacific Region at a high risk of debt distress.

Asian Development Bank's [ADB] outlook for this month points to natural calamities and labor shortages persisting as challengers to future growth [and] in addition, the Pacific [countries] face challenges emanating from limited fiscal space and debt distress.

"Currently, seven of the 14 Pacific developing member countries are at high risk of debt distress - Kiribati, the Marshall Islands, PNG, Samoa, Tonga, Tuvalu and Vanuatu.

"The remaining seven are moderate risk - the Cook Islands, Fiji, the Federated States of Micronesia, Nauru, Niue, Palau and Solomon Islands."

The International Monetary Fund states that "unsustainable debt can lead to debt distress, where a country is unable to fulfill its financial obligations and debt restructuring is required."

Furthermore, the ADB Outlook for September made slight adjustments to the forcasted gross domestic product [GDP] and inflation rates for Pacific economies.

"The Pacific Sub-Region is now forecast to grow slightly faster than projected in April 2024. This is mainly attributed to higher growth in Fiji, the second-largest economy in the sub-region, which more than offsets lower growth in PNG, the predominant economy in the Pacific.

"The inflation forecast for 2024 has been revised down largely due to deflation in PNG during the first half of the year. The forecast for 2025 remains unchanged."

The economy prospects of the Pacific are primarily determined by PNG and Fiji economies which accounts to 90% of the subregion GDP.