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An improvement in the political and policy environments in emerging Pacific sovereigns is a precondition for better and sustainable credit quality, according to a report published by Standard & Poor ’s Ratings Services entitled -The Emerging Pacific's Predicament: Maintaining Stable And Effective Government.
According to S&P, ineffective governance in the emerging Pacific has prevented reforms that are necessary to spur private investment and growth, while social tensions and political violence have further hindered the development of corrective policies. In countries like Papua New Guinea and Fiji, ongoing problems in the security and political environments continue to constrain the countries’ economic and fiscal profiles.
The report highlights the recent improvement in Papua New Guinea’s economic and fiscal performance, but warns of potential risks on the horizon. Given the new government is yet to be tested and ongoing security concerns; there is a degree of uncertainty about whether PNG can translate its current economic fortunes into a lasting improvement in its credit quality.
Uncertainty also lingers in Fiji as a result of the December 2006 coup, which dented the sovereign’s economic and credit ratings outlook. While Fiji’s interim government has set out a broad agenda to reduce its fiscal deficit and stabilize foreign reserves, the ongoing effects of the coup will make its job tough.
As with previous coups in Fiji, the immediate effects are to weaken investor and international tourist sentiment. Confidence among these groups should recover as it has in the past, but the long-term effects of this and previous coups may prove more damaging.
21-Aug-2007
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