This week's PNG budget faces extraordinary revenue collapse
01 November 2015
JEMIMA GARRETT | Pacific Beat, ABC | Extracts
AS Papua New Guinea Treasurer Patrick Pruaitch prepares to deliver his 2016 budget this week, economists are warning the country is facing a revenue collapse of historic proportions.
Economist Paul Flanagan, a former PNG Treasury official, said the budget due to be delivered on Tuesday will be "very, very tough", precipitated by what he described as "an extraordinary collapse in revenues".
"International commodity prices have dropped and that has taken about 10% of their revenues," Mr Flanagan told Pacific Beat.
Drought and other pressures such as exchange rate controls have slashed revenue predictions further.
"These are cuts of about 20% in revenues even from the 2015 budget," Mr Flanagan said.
Mr Pruaitch announced a delay in the return to budget surpluses from 2017 to 2020 when he released his 2016 budget strategy statement last week.
Mr Flanagan said that was "a sensible and overdue move" but the cuts to spending proposed by the government were huge.
"They are looking, for example, on the expenditure side, to go from government expenditure being about one third of the economy to only 21 per cent by 2020," Mr Flanagan said.
PNG's prime minister Peter O'Neill has moved to calm public nerves because of the predicted big spending cuts.
"This is a conservative budget that carefully manages spending to ensure essential services are delivered to the people," Mr O'Neill said.
Mr O'Neill said school fees, access to health care and critical infrastructure would continue to be properly funded, while more would be spent on police, courts and prisons.
"The budget ... is one that better positions our economy to confront international challenges including low commodity prices and global economic uncertainty," he said.
But the quarantining of so many areas from spending cuts is also raising eyebrows.
Every time I read and watch in the TV the Prime Minister mentioning free Health care, but its a universal fact in PNG that when you go to the Hospital you will pay K2 for out-patient charges, K10 for night and X-ray is about K15-K25 depending on urban or rural areas. Just to get a medical examination; with the medical certificate; would cost about K50. That's at Kiunga Hospital.
Posted by: Gelab Piak | 05 November 2015 at 07:19 AM