As Economic Fears Grow, PNG Government Plans Mini-Budget

admin's picture

Supplementary Budget to address significant revenue deficit

PORT MORESBY, Papua New Guinea (PNG Post-Courier, Aug. 7, 2015) – The Government yesterday indicated that it will bring down a Supplementary Budget as concerns continued to grow locally and internationally on the true state of the Papua New Guinea economy.

Treasurer Patrick Pruaitch yesterday said the Government will bring down an Appropriations Reduction Bill, but emphasised that the 2015 National Budget priority areas of education, health, law and order and provincial and district support grants will not be affected.

"In implementing these measures, the Government will ensure that the deficit will be lower than the deficit planned in the 2015 Budget, and the debt to GDP ratio will be not greater from that allowed under the Financial Responsibility Act," he said in a statement yesterday afternoon.

"As most observers are aware, the drop in global oil prices has had an effect on gas prices in 2015. This has had an impact on revenues derived from the PNG LNG project. There have also been drops in other commodity prices, including gold and copper, as well as a decrease in taxes collected."

There have also been drops in other commodity prices including gold and copper as well as a decrease in taxes collected. The partial closure of the Ok Tedi mine in the Western Province, which at one time contributed 5.5 per cent PNG’s GDP, will also add to the country’s fiscal crisis according to observers.

The announcement by Mr Pruaitch comes three days after the Treasury Department-authored 2015 Mid-Year Economic and Fiscal Outlook Report appealed for the need by Government to maintain fiscal discipline though the second half of this year to avoid a budget blowout.

According to the report, the June outturn debt to GDP ratio stood at 33.5 per cent of GDP. Failure to adjust aggregate expenditure could see total public debt increase to K21,239.0 million [US$7.5 billion] which would lead to a debt to GDP ratio of 41.3 per cent – consequently exceeding the debt limit of less than 35 per cent of GDP as set out in the Fiscal Responsibility Act.

The Government will reduce its expenditure says Mr Pruaitch but it will not be done in a "frivolous manner and detract from the economic growth momentum" achieved under the O’Neill-Dion Government.

But Paul Flanagan, an Australian who worked as a senior executive in the Australian Treasury and was seconded to the PNG Treasury Department from 2011-2013, wrote in an analysis paper for the Australian National University (ANU) published early this week that the budget readjustments should have been done in the first quarter of 2015.

He also said making required cuts to the budget will be "extremely challenging" as the 2016 budget is due in three months and some tough political decisions will need to be made in the lead-up to the 2017 general election – if PNG is to ride out this financial crisis.

Rate this article: 
No votes yet

Add new comment