Standard & Poor’s ratings agency has maintained its year-long rating of Papua New Guinea’s economy as stable, but has some concerns.

In a comprehensive assessment on the health of the PNG economy, the agency has kept foreign and local currency long-term ratings at ‘B+’, and the short-term ratings at ‘B’.

‘The stable outlook assumes that the PNG LNG project will come on stream on time,’ says analyst Craig Michaels in a statement. The government will retain its stake in the project and refinance its related debt, and external and fiscal imbalances will ease with the increased output.

‘If these assumptions do not hold, the rating could come under pressure.

‘Conversely, if the PNG LNG project boosts the country’s economic performance significantly and maintains growth on a higher trajectory, resulting in development and better fiscal and external positions, upward pressure on the rating could emerge.’

Michaels points out the prevalence of urban crime in the country deters investment, while governmental checks and balances are limited.

He also said a lack of transparency in public sector finances makes credit analysis more difficult.

‘We expect PNG’s net debt levels to remain below 30% of GDP and to resume declining once LNG production starts.

‘PNG’s budget performance will remain vulnerable to volatility in commodity prices, though. And PNG’s domestic banks already hold a large share of their assets in government debt, potentially constraining their ability to fund further government borrowing.’