PAPUA New Guinea’s recent supplementary budget is a positive development and confirms that key government ministers accept the importance of budget repair.
The K1,886 million loss of tax revenue has been replaced exactly through revenue-raising measures of K958 million and expenditure cuts of K928 million.
The confidence-building objectives of the announcement are partially undermined by the lack of debate in parliament and the lack of transparency.
The details have not been released and a copy of the supplementary budget is not on the Treasury website.
Unfortunately, the K958 million in revenue measures are largely playing games and certainly do not represent sustainable increases in the revenue base.
The sale of shares in the PNG LNG project to landowners does not improve the government's net worth - it is simply a substitute of one good asset held by government (the shares) with another asset (cash). This is a capital transaction and technically does not reduce the budget deficit.
Interestingly, the expected returns from this sale are well below the K2,500 million assumed in the 2015 budget. Indeed, they appear closer to the K600 million estimated in the 2014 budget.
The other revenue measure of increased dividends from state owned enterprises would seem to come at a time when those enterprises are already facing cash flow issues on their operations.
There appears to be a growing practice of state owned enterprises borrowing from local banks simply to pay dividends to government - this is not a long-term strategy for PNG's development.
The major source of expenditure cuts are in infrastructure. With a K649.3 million cut, capital works spending falls to K1,267 million, a 71% cut relative to the 2014 peak.
It is positive that maintenance expenditure is being protected as it is much better to maintain roads than build new ones. There clearly were wasteful capital projects which would do little to build the welfare of people in PNG.
However, the extent of cuts is a cause of concern. Infrastructure spending is now half the level of 2012. Well designed, properly tendered, priority capital work projects can be vital for improving development outcomes in PNG.
More effort should be directed towards cutting costs in areas such as the public service and re-evaluating the effectiveness of some of the government's key policies - including the District Services Improvement Program.
It is of concern that the government has, from 2013 to 2016, the largest pattern of deficits in PNG's history. Money was spent, sometimes on grandiose projects, well before money had been received. Future generations in PNG will pay for this.
The supplementary budget document is primarily a useful confirmation that there are those in government who recognise something needs to be done to repair the budget.
However, based on the information available, it does not appear that actual structural changes are being made to deal with PNG's wider economic problems.
So, although the supplementary budget is a positive step, the politically tough decisions required for PNG's long-term sustainable development are not being made.