Dispute affects investors: Bank
Updated: Oct 2
The World Bank says ongoing dispute on the Porgera gold mine in Enga may affect investor confidence.
In its East Asia and Pacific Economic Update released yesterday, the bank said the Covid-19 was one of the issues which could have lasting impacts on the country’s economy.
“The main risks include the possibility that the Covid-19 pandemic lingers and has a lasting economic impact on the economy,” it said.
“In addition, ongoing disputes around the Porgera mine may affect investor confidence and, therefore, should be treated carefully.”
It said updated projections for 2020 suggested that the economy would contract 3.3 per cent in 2020.
“International and domestic movement restrictions have weakened external and domestic demand and suppressed commodity prices, except for gold,” it said.
“Disputes with international investors over the ongoing and new resource projects are also contributing to lower growth in 2020.”
It said the Covid-19 had also affected the country’s “already complicated fiscal picture and would lead to a higher debt-to-GDP ratio”.
“Before the Covid-19, the Government was planning the fiscal deficit at 5 per cent of GDP in 2020, which was higher than in the previous years due to substantial budget arrears accumulated by the Government,” it said.
“The Covid-19 impacts will lead to a higher fiscal deficit, estimated at 8.1 percent of revised GDP, and a higher debt-to-GDP ratio, estimated to exceed 48 per cent of revised GDP in 2020.
“To contain public debt from growing further, the Government will need to resume its fiscal consolidation efforts in the post-Covid-19 period, by focusing more on mobilising domestic revenue and improving efficiency of public spending.”
It said the Central Bank was expected to continue its accommodative monetary policy over the near term with potential normalisation to follow subject to inflationary pressure and economic growth.
“However, the Central Bank should address structural deficiencies within the financial sector to ensure these policies have the desired impacts,” it said.
“Policies such as reducing excess liquidity, enabling healthy competition, enhancing the effectiveness of money markets and improving the investment climate in the financial sector should complement the monetary stimulus package.”