SYDNEY: Ratings agency Standard & Poor's has revised its outlook on the long-term sovereign credit rating for Papua New Guinea from stable to negative following political turmoil in the Pacific state.
The impoverished but resource-rich nation has endured political uncertainty since December when the Supreme Court ruled Prime Minister Peter O'Neill had illegally replaced veteran leader Michael Somare.
The Governor-General Sir Michael Ogio later recognised O'Neill as leader but Somare has said that he still believes he is the people's representative and last week army elements loyal to the "grand chief" launched a failed uprising.
In a statement issued late Friday, Standard & Poor's said the outlook change reflected the country's weakened political settings, as it reaffirmed its B+ local and foreign currency long-term rating and B short-term rating.
Standard & Poor's credit analyst Kyran Curry said the revision reflected the risk that things could deteriorate if the political situation is not resolved.
"The key thing for us is it's very important for PNG's development... for there to be engagement by donors and investors to open up the economy," he told AFP on Monday.
"The investment environment in PNG is difficult enough through law and order issues without political frictions happening at the national level. So there's just the risk that investors will dry up."
Standard & Poor's said the country's lack of transparency, infrastructure shortcomings and security risks added to its outlook assessment and it would lower ratings if the political instability led to a loss of investment.
Rugged Papua New Guinea stands on the threshold of a major resources boom due to its major gas reserves, but the nation of some 6.6 million remains mired in poverty.
It is due to hold elections later this year, which analysts hope will resolve the political tensions.
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