Ok Tedi updates plans for temporary suspension of mining
A call to rally behind the Port Moresby Writers’ Association

'Frightening': PNG budget in disarray as deficit soars

Port Moresby waterfrontROWAN CALLICK | The Australian | Extract

THE midyear update in Papua New Guinea’s budgetary position is “a frightening document” says a leading Australian expert on the country’s economy.

The outlook published this week on the 2015 budget reveals that the government deficit is set to blow out this calendar year from the planned 4.4% of gross domestic product to 9.4%.

Public debt is now projected to soar from a forecast 27.8% of GDP to 41.3%.

Paul Flanagan, a former senior Australian Treasury official and adviser to the PNG Treasury and now a visiting fellow at the Development Policy Centre at the Australian National University, said “in Australia such a rapid change in the estimated fiscal position would go well beyond being termed a ‘budget crisis’.”

He said the causes of this rapid deterioration include the fall of commodity prices, a growth slowdown and sales of public assets not proceeding as rapidly as planned.

Resource revenues are now expected to be $800 million below budget estimates, worsened by the temporary closure of the Ok Tedi mine — attributed to a drought triggered by El Niño conditions.

Mr Flanagan said the fall in non-resource revenues was surprising. Overall, government revenues were expected to be down on expectations by $1.25bn, or 20.7% of the revenue base.

He said that the “silent path” — not issuing warrants to government agencies and thus preventing them from spending — “does nothing to rebuild confidence in the economy, and just delays the near-inevitable political pain, with the 2016 budget due in three months.

“Making the required cuts will be extremely challenging. With the 2017 election looming, political choices need to be made now and in the 2016 budget.”

Mr Flanagan said he was concerned that “financing a deficit of 9% of GDP will be next to impossible”.


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Arthur Williams

Busa wrote about the rush for getting LNG#2 once called LNG Gulf and LNG#3 or LNG Western on stream.

Rightly he stresses that this will lead to lack of proper pre-construction exercise like land ownership, social mapping and impact assessments.

I am still amazed that, after billions of LNG being exported by Exxon up in the mountains, we can read in The National “Hides gas field PDL1 have called on the national government not to release royalty and equity funds held in trust until proper clan vetting has been completed.”

But after all who can argue with an oil company like Exxon, one of the original 7-Sisters, who wants your oil or gas now!

That unholy rush to get it out of the ground has come to the fore in Total Oil complete ignoring the oft stated desire of the Gulf people for the next LNG gas project to be based fully in their province.

What is wrong with people from one of poorest provinces of PNG wanting to share in the wealth of the nation? But even the one day to be arrested PM O'Neill, if he ever ceases to play legal shenanigans [who is paying for his overseas legal advisers?] to delay such an event, is on side with the foreign company.

I wonder why the three Gulf MPs suddenly sided with Total against their own citizens?

No project should get beyond exploration stage until after all clan vetting, landownership, environmental impacts assessments are completed.

Without any of these no preparatory work should be allowed to commence. The uneducated subsistence rural people have only one asset in their arsenal to stand up to Total and the other resource grabbers and that is they are landowners.

Without their permission no project should be allowed to proceed even if it is vital to balance budgets.

After all there are estimates of many many billions of resource generated funds having been diverted into off shore assets including millionaire homes in Queensland which we partially know about but of more clever deals by corrupt elites who with better overseas advisors have squirrelled their fraudulent funds far from the eye of the general public.

Out in the swamps of Western in the late 1970s I read '7-Sisters' by Anthony Sampson and it opened my eyes to the power of the few then mostly USA, UK and French nascent oily-garchs ability to subvert the oil rich resource nations from the 1928 onwards.

There has been a documentary with the same title on Al Jazeera that reveals the shady deals of the Sisters and one of its later adherents, France's Total who was heir to another oil company Elf, which was at the centre of what has been alleged as the biggest fraud inquiry in Europe since the Second World War.

Just beginning 'The Squeeze' by Tom Bower – 'Oil, Money and Greed in the 21st Century.' it looks like being just as impressive a read as the 1975 '7-Sisters'.

I can only pray that the Gulf's 107,000 people minus 3 MPs will really try to stand up to Waigani elites and their friends at Total and repeat that their resources will not be diverted to Moresby.

But judging by the long slimy trail of the oily-garchs I cannot hope for a happy result for them. A casual glance at Total's track record elsewhere in the 3rd world doesn't hold out much chance.

Nil illegitimi carborundum.

Busa Jeremiah Wenogo

The problem with PNG's Economy right now is that it is in danger of "sinking" because of "pride".

The increase in expenditure (which I suspect has already push the "GDP-debt ratio" beyond the required ceiling in the Fiscal Responsibility Act contrary to media reports and statements from Treasury) has now surpassed historical spending figures since independence.

This has all come about because we have decided to play "big men" politics nationally, regionally and globally.

A downturn in commodity prices and other factors are now being blamed for this huge gap between expenditure (actual) and revenue (projected) however, we must never forget the fact that we have spent well beyond what we could have.

Is it mismanagement of the economy? Yes I think so because any right thinking government knows that we are mortgaging our assets (SOEs and other assets) as collateral for the loans against future earnings that are bound to fluctuate.

While the argument will be that PNG unlike in the past has the capacity to spend to that level because of large projects like LNG and other extractive projects, the government must be mindful that much of these large investments are primarily driven by loans.

Somewhere down the line the government (today and future) will have to pay for it regardless whether we are earning income from our exports or not.

The current situation of our economy has a very real possibility of pushing our government to ramp up its effort to get the 2nd and possible 3rd LNG into production mode as soon as possible. It will also mean more exploration and development licenses will be issued for potential investors to make "its books" look good.

The danger in all of this is that it will lead to unsustainable outcomes where no proper "social mapping" and "environmental impact assessment" will be done.

Because of our reckless management of the economy to satisfy our "pride" we will be putting the lives of our people now and the future generation at risks.

In economics it is known that whenever a government plans to undertake a "fiscal expansionary budget"/deficit budget it will be very difficult to reign in the expenditures when the popularity of the government sours as a result of increase economic activities and general improvement in the well-being of the population in terms of employment and income generation.

The current government has basically done that in its commitment to host regional and global events while churning out large chunk of money to Port Moresby at the expense of the rest of PNG.

In order to get our economy back on track the government will have to "humble" itself. Furthermore, it needs to grasp the reality facing most of our Papua New Guineans rather than working on a "default" mode assuming that all be OK.

No it will not so long as we "beat our chest" in "pride". Too much of our "pride" has already brought our economy to its knees. What is happening to Ok Tedi could be an indication that we have done so much harm than good to our own economy and people that it is now time to change our approach.

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