Fitch warns of potential political ‘flashpoints’ in Papua New Guinea but notes boosted confidence


Recent developments in the Papua New Guinea’s resources sector should boost confidence, according to international ratings agency Fitch Solutions. Its latest outlook on the country, however, warns of ‘policy uncertainty and ongoing risks to social stability’.

The view over the Wafi-Golpu project area. Credit: Newcrest Mining.

The latest Fitch outlook is a mixed bag for Papua New Guinea.

While it states ‘recent breakthroughs on the big ticket Papua LNG energy and Wafi-Golpu mining projects, alongside an agreement to restart operations at the Porgera gold mine, should provide a boost to confidence’, it also warns that questions over the Marape government’s ‘policy approach and management of negotiations’ for resources projects remain.

‘[Autonomous Region of Bougainville President] Toroama’s recent call for independence to be granted by 2025 seems unrealistic in our view.’

‘We also note the potential for further delays to these projects, which would weigh on PNG’s longer-term growth outlook,’ it says.

Easing political risk

While it claims the risks of another political crisis in Papua New Guinea, similar to that of late 2020, have ‘eased’, the report also identifies three potentially de-stabilising factors in PNG politics, which are behind it giving PNG its lowest political risk rating of any Pacific country: 44.0 out of 100 in its Short-Term Political Risk Index.

The first of these is PNG’s management of COVID-19. The report notes PNG is still struggling to control the virus and, while PNG’s national vaccine campaign has begun, it warns ‘there remain concerns about take up amid widespread public mistrust and misinformation about the vaccines’.

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At the same time, it says it is expecting PNG’s Marape government to face ‘further pressure in the run up to the next general election [due in July 2022] due to a fragile coalition majority and a number of major policy challenges’.


Finally, the report identifies the Bougainville independence negotiations as ‘one of the biggest challenges facing the central government in PNG’ and a potential source of future political instability.

‘While the dialogue has so far been constructive, talks are likely to be delicate and complex, with the potential for rising tensions if the Bougainville leadership becomes frustrated at a lack of perceived progress.

‘Indeed, [Autonomous Region of Bougainville President] Toroama’s recent call for independence to be granted by 2025 seems unrealistic in our view, particularly given a potential change in PNG government following elections in 2022 and the need for the national parliament to ratify any agreement.’

Fitch recently downgraded its real GDP growth prediction for PNG in 2021, from 3.2 per cent to 2.4 per cent.

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