By Wilson Braidwood Sukumano
Public debt doesn’t necessarily mean or strictly limited to loan only. It basically refers to the accumulated borrowing and financial obligations incurred by the government at the national level. It includes various forms of borrowing from domestic, international sources, guarantees, and contingent liabilities;
- External debt refers to includes loans and financial obligations owed to bilateral and multilateral institutions, foreign governments, commercial banks, and international bondholders.
- Domestic debt comprises loans and financial obligations owed to domestic banks, financial institutions, organizations such as superfunds or individuals.
- Public debt also includes government guarantees provided to support borrowing by state-owned enterprises (SOEs) or other entities. Government guarantees are commitments made by the government to repay the debt in case the borrower defaults. If the guaranteed debt becomes due, the government may assume the responsibility of repayment, which adds to the overall public debt burden.
- Contingent liabilities represent potential financial obligations that may arise in the future under certain conditions. These liabilities include guarantees, indemnities, or commitments made by the government that may require financial support.
It’s important to note that the composition and levels of public debt in PNG can change over time due to borrowing activities, debt repayments, currency fluctuations, and other economic factors. Managing public debt is crucial to ensure fiscal sustainability and avoid excessive debt burdens that could hinder economic development and financial stability.
People with limited knowledge or convoluted with politics quickly jump to the conclusion that public debt is loans. No. It’s not. Public debt in 2019 was around K39b and in 2023 is around K53b. This doesn’t mean Government got all the loans. People misunderstand the background of public debts and must do some research before misleading others.
