S&P lifts Papua New Guinea

Standard & Poor's said it raised Papua New Guinea's long-term foreign-currency rating to B+ from B and its long-term local-currency rating to BB- from B+.

The outlook is stable.

The upgrade reflects the improvement in the sovereign's fiscal and external balance sheets and advances in the political environment, the agency said. High commodity prices have boosted investment and economic growth, and the government has used the related increase in revenues to reduce the government debt burden, thereby enhancing fiscal flexibility.

S&P said the strength of the mineral sector has also bolstered Papua New Guinea's external accounts. The country's external debt, net of liquid assets, is in an estimated creditor position of 3.4% of current account receipts, versus a net debt position of 23.5% in 2005.

Although the government's fiscal balances have improved, the quality of public services remains poor, the agency noted, adding that Papua New Guinea as made little improvement in literacy and other human development indicators.

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