Still today, the rituals of Engan tribal warfare prevail
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Government pay cheques bounce as PNG budget struggles

Peter O'NeillJEMIMA GARRETT | Australian Broadcasting Corporation

PAPUA New Guinea's cash flow crisis is so bad that politicians and public servants are not being paid on time, vital services are not receiving funding and government cheques are bouncing.

Latest figures from the International Monetary Fund show the country's debt is worse than officially acknowledged and government spending commitments have been significantly underestimated.

The new revelations come as PNG seeks to refinance its controversial $US1 billion UBS loan for its 10% stake in PNG-focused company Oil Search. The existing loan is set to expire at the end of the month.

Like many other resource-rich countries, PNG has seen its tax revenue plummet as mining and petroleum companies try to deal with low commodity prices.

PNG's Opposition Leader and former treasurer Don Polye told the ABC's Pacific Beat program that opposition and government MPs as well as at least four government ministers are suffering shortfalls in their wages.

"One of these is a senior minister who actually told me he had not been paid in full since September last year," Mr Polye said.

Shortfalls in funding for government and church-run schools and government health clinics also started to bite in September.

In December, teachers were not paid expected holiday fares to go home to visit family.

The latest public servants to be hit are staff of the PNG's National Broadcasting Corporation.

Popular Oro province Governor Gary Juffa told online news service PNG Loop that NBC workers have now been waiting one week for their fortnightly wage, the first time delays have exceeded two days.

Many of the workers pay high rents and support extended family.

"This is alarming ... what is the reason for the delay?" Mr Juffa asked. "The Government must explain the delay and assure the country of its finances."

As PNG struggles to pay its bills, a new analysis of the latest IMF figures shows the country's debt is worse than officially acknowledged.

The 2016 budget expects public debt to reach 35% of GDP in 2015-2016, but that does not include debt owed by state-owned enterprises, superannuation arrears or loans from investment bank UBS for PNG's Oil Search shares.

When these are taken into account total public debt is much higher — 56% of GDP — according to Lowy Institute Research Fellow Jonathan Pryke.

The cost of servicing PNG's acknowledged debt is set to treble from 2012 to 2016 and is already more than 10% of government expenditure.

"So much money has now been funnelled straight into debt-servicing and debt repayments that the Government actually has far less money to focus on the key components of governance which is delivering services [and] paying wages," Mr Pryke said

"It has really exacerbated this cash flow crisis."

More nasty surprises could be in store

The cost of PNG's plans to host an expected 10,000 delegates for 180 meetings at the APEC leaders' summit in 2018 is raising questions.

The IMF estimates K3 billion (nearly $A1.4 billion) will be needed for infrastructure, security and entertainment — almost as much as the K3.5 billion budget for health over the next three years.

So far PNG has budgeted K80 million for APEC.

To cope with the cash flow crisis the government has announced cuts to health and education.

"Education expenditure is being slashed by 20% this year and 20% next year, health is being slashed by 1% this year but in 2017 it will be slashed by 40%," Mr Pryke said.

"None of these numbers stack up as being credible in terms of ... spending so much money on APEC."

More questions are being asked about the PNG government's plans to raise hundreds of millions of dollars to fund its deficit through a sovereign bond issue and about its planned refinancing of the UBS loan.

With domestic liquidity almost non-existent and overseas interest subdued, the bond issue due last November was delayed.

Its future is unclear but it is expected to go to market mid-year.

The UBS loan could be decided within days. PNG is keen to push ahead with refinancing and keep its Oil Search shares but economists are doubtful.

"Many people would argue that the state really should concentrate on its core functions of providing law and order, health, education, infrastructure maintenance and so on," Paul Barker, executive director of the PNG Institute of National Affairs, said.

The original UBS loan cost PNG dearly and a new one is likely to, too.

But, if PNG exits Oil Search now, it will take a big loss.

The Oil Search share price has rebounded strongly in the last week but at $7.33 it is still a long way off the $8.20 the PNG Government paid just over a year ago.

PNG's Prime Minister Peter O'Neill and Treasury Secretary Diari Vele are expected to address a leaders' summit in Port Moresby today.


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Barbara Short

Vikki, well said. I agree.
They have been brain-washed. This makes them very set in their ways and unable to listen to people who try to get them to understand the truth, which doesn't agree with what they have in their brains.

Philip Fitzpatrick

For those people with relatives struggling in PNG you can now send topups for their mobil phones from Australia.

Check it out at:

Daniel Ipan Kumbon

Yes Arthur, what is PNG - with three quarters of its people illiterate and young inexperienced leaders at the helm compared to Exxon Mobil and other multi-national corporate giants? They see us like clear glass - straight through.

Leave some of our resources in the ground if we care for the future. There are far too many world class projects in operation right now generating enough revenue to sustain the country. But Waigani must give up deep-rooted corruption which is what impedes the growth of our young nation.

Vikki John

In my opinion, the PM of PNG, Peter O'Neill, has been brainwashed and manipulated by the mining companies from Australia and other foreign lands.

The mining companies do not give a damn about the people in PNG or anywhere else. They are driven by money so people or the environment do not come into the equation.

It seems apparent that most of the mining companies who have mining operations in PNG do not even pay their corporate taxes, but brag about the millions and billions they made once again without any respect for the people of PNG.

The gold, the copper and the nickel that they continue to take from the land of PNG and leaving massive environmental damage in the process. And who is reallly happy?

The shareholders of the mining companies and their the CEOs.

Check this out from the Sydney Morning Herald on 1 October 2014....

The new boss of Newcrest Mining, Sandeep Biswas, will take home the biggest base salary of Australia's major miners.

Remuneration data published by the nation's biggest mining companies over recent weeks shows that even the bosses of BHP Billiton and Rio Tinto will receive less guaranteed pay than Mr Biswas, who joined the gold miner in 2014.

The former Rio Tinto executive will receive $2.3 million as a guaranteed base wage at Newcrest, before bonuses and pensions are taken into account.

Despite receiving an 11 per cent pay rise ahead of the 2015 financial year, Fortescue Metals Group chief executive Nev Power will still receive a lower base wage of $2 million.

The chief executive of Australia's biggest company, BHP's Andrew Mackenzie, will take home a base wage of $US1.7 million, while his counterpart at Rio Tinto, Sam Walsh, will take home $1.94 million.

The four companies all take a different approach to bonuses, pensions and fringe benefits, with the BHP system enabling Mr Mackenzie to earn as much as $US13 million this year if both he and BHP were to demonstrate "outstanding" performance.

Read more:

Apparently PNG is also losing hundreds of millions from logging companies too.

So are the foreign mining companies and the foreign logging companies "friends" of PNG and elsewhere?

No. They brainwash the elites of PNG who have no any respect for the majority of its citizens living in PNG or their environment.

Arthur Williams

And here's me feeling so glad the PM was recently granted the prestigious fellow membership award of the Institute of Certified Management Accountants of Australia.

I recall all the hype of how the huge mining and other resource based industries projects were going to change lives for ordinary people in PNG.

Especially our wonderful LNG project which has seen 160 shipments at around K150 million a trip. That's K24 billion. Mani stap we?

Just look at the poverty in Nigeria's oil producing areas and indeed all over the world where the multinationals rip off the so sadly uneducated elites who wander around places like Waigani and the 5 Star Hotels as if they know it all and are mere babes in arms when dealing with the likes of Exxon, Total, etc.

Leave the bloody stuff in the ground – it doesn't need food or drink and will still be there when all the other idiot led nations have sent their wealth down the long drops.

Philip Fitzpatrick

The doomsayers are having a field day with this one.

I've been getting emails all day telling me about it.

Most of them are of the "I told you so" kind.

Still, it will be interesting to see how PNG muddles out of this one.

Muddlocracy - now there's a nice noun.

Michael Dom

Ahah! And a very fitting 30,000th comment too, methinks!

Chris Overland

The PNG government seems to have a gift for falling into every available fiscal trap.

At one level this is understandable in a country where so few people have the education, knowledge and skills required to navigate the world's incredibly complex financial system.

That said, there still are people with the capacity to provide good advice and they presumably do so but, somehow, it seems the political class contrives to ignore such advice.

The UBS loan is a case in point: it was unwise, seen to be unwise and proclaimed publicly to be unwise (indeed, foolhardy), yet it was taken out anyway.

As Paul has said, now a large flock of fiscal chickens is circling to land.

As usual, the poor, the sick and the powerless will pay.

Michael Dom

This is the 30,000th Comment to be published in PNG Attitude.... - KJ

Leaders summit?

Oh, oh!

I think they're gonna milk the superannuation funds next.

How much money will that give them and is that even legal?

Then again, forget the legal part, they'll probably legislate for it.

Paul Oates

PNG was fortunate to miss the worse of the 2008 Global Financial Crisis as most of her people weren't involved in the loss of savings and retirement nest eggs due to greedy and criminal bankers selling toxic loans to people who thought the bonanza wouldn't end.

Now PNG leaders appear to have been caught up in the global financial troubles brought on by oil producers who are battling each other for control of markets and financial gain.

The problem this time will affect PNG if it goes on too long since her government appears to be unable to pay for government services due to 'cash flow problems'. The churlish may suggest that the problem is simply one of greed and criminal behaviour under a different name.

It just goes to show that PNG is not immune to matters that affect the so called 'global village'.

As an example of poor leadership in PNG, why force through a more expensive non tender process for a foreign contract for rural medical supplies when Australia had paid for but not benefited from a successful contract during the previous two years? Now the health budget has to be slashed along with the education budget.

The old saying 'chickens come home to roost' seems apposite.

The real problem is still one of education and information since those who elect the incompetent often don't realize what they are really in fact doing is ruining their country and their own future.

Still, this is not only a problem in PNG. It seems that it's a world wide problem called human nature.

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