Fitch ups Papua New Guinea view to positive

Fitch Ratings said it revised the outlook on Papua New Guinea's long-term foreign- and local-currency issuer default ratings to positive from stable and affirmed the ratings at B and B+, respectively, along with the country ceiling at B and short-term foreign-currency rating at B.

The sovereign creditworthiness of Papua New Guinea is supported by the most stable political environment since independence, which is facilitating the implementation of economic policies that are resulting in steady declines in government and external indebtedness, Fitch said.

The country's external accounts have been buoyed by higher commodity prices. Official foreign exchange reserves are now more than $1 billion for the first time, contributing to improvements in net external debt ratios and a stronger external liquidity position, Fitch said.

The ratings remain constrained by the relatively weak private sector, where investment decisions are affected by law and order considerations as well as governance issues, the agency said. In the absence of improvements in these areas, Fitch said it will be difficult for GDP growth to accelerate sufficiently to lift the majority of the labor force out of subsistence farming and into the formal economy.

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