PNG's economic outlook downgraded following failed army mutiny

27/01/2012 21:40

Self-styled PNGDF commander Colonel Yaurra Sasa. Picture courtesy of ABC


Papua New Guinea’s attraction as an investment destination has taken a hit following yesterday’s failed attempt by pro-Somare soldiers to remove the O’Neill government.

Global ratings agency Standard & Poor’s (S&P) has according to Reuters revised its outlook for the PNG economy to negative following yesterday’s events, when pro-Somare soldiers placed their commander under house arrest and tried to forcefully reinstate the Somare government.

S&P also warned that it would lower its ratings on PNG further if the two sides led by Supreme Court-reinstated Prime Minister Sir Michael Somare and his parliament-elected rival Peter O’Neill failed to break the stalemate.

“Political settings in PNG have weakened following the detention and later release of the defense force chief. We 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,” said S&P in revising down the outlook for PNG, whose 'B+/B' sovereign credit rating was affirmed.

The two rivals groups have returned to the Supreme Court. The O’Neill camp has asked for its interpretation of retrospective legislation which parliament enacted in response to its December 12, 2011 ruling, while their rivals have asked PNG’s high court to reinforce its decision which reinstated Sir Michael as PM.

There appears to be no end in sight with Betha Somare, Sir Michael’s daughter and press secretary, telling Australian journalists following yesterday’s failed mutiny that the standoff will continue.

“There will still be a stand-off. They're (the O'Neill government) not going to move against my folks,” she reportedly said.

Sir Michael has confirmed Yaurra Sasa, the army colonel who was brought out of retirement to lead the failed mutiny at the PNG army headquarters Murray Barracks, was appointed by his cabinet and directed to “take control” of the PNG Defence Force.

“It is incumbent on the police and army to comply with the orders of the Supreme Court and support the legitimate government, which is the minority Somare/Agiru government. It is for this reason that my government had appointed Colonel Yaurra Sasa to take control of the PNGDF while we await other outcomes of the court,” he said in a statement.

Refusal by senior PNGDF officers at Murray Barracks and other military establishments outside Port Moresby to back Colonel Sasa eventually led to the arrest of the renegade soldiers and the freeing of army commander Brig-General Francis Agwi.

The rebel soldiers’ unsuccessful attempt to force the reinstatement of the Somare government has reportedly compelled Mr O’Neill to consider dissolving parliament in order to force early elections.