28 Jan 2012

PNG's failed mutiny worsens investment risk

7:15 am on 28 January 2012

The credit rating agency Standard and Poors has downgraded Papua New Guinea's investment risk, warning the political crisis, with two competing prime ministers, is impeding the resource-driven economy.

This week, up to 20 soldiers raided the main army barracks in Port Moresby, seized their chief commander and placed him under house arrest, and announced a new military commander.

Standard and Poors has revised PNG's outlook to negative, while affirming the B+/B' sovereign credit rating.

The agency says political settings in PNG have weakened following the detention and later release of the defense force chief.

It says it would lower the ratings if the political friction remains unresolved, leading to a loss of donor support and investment required to diversify the economy and buttress PNG's government finances and external position.