On the face of it, it appears that the government has started doing some of the hard yards required to get the budget back on track.

There will be an expenditure reallocation of K800 million to pay for cost over-runs and a further cut in expenditure of K494 million – a total of K1,294 million.

Given the original 2017 budget had total expenditure at K12,008 million (excluding donor grants), this is a domestic expenditure saving effort late in the year of 10.8%.

An extraordinary effort. However, there are significant doubts about the true nature of the “savings”.

The supplementary budget includes massive cash reductions to district and provincial support improvement programs totalling K925.22 million - so 71.5% of the total “savings” in this budget are for various support improvement programs.

But there was no mention of this anywhere in the treasurer’s 14 page speech. This is deeply disturbing.

The silence on these major cuts is particularly problematic given that the prime minister declared from New York that the programs would not be cut. So what is actually happening?

The reduction in district and provincial improvement funds provides a powerful lever for the prime minister to build government numbers as he can now argue there are not enough funds to pay all DSIP or PSIP allocations and that the government must be extremely selective about which MPs get paid.

With a game being played on something supposed to deliver over 70% of savings, the supplementary budget inevitability loses some credibility.

There is likelihood that the deficit will be significantly larger due to revenue shortfalls. Kumul Petroleum is expected to pay a dividend of K350 million – unlikely after the large losses it suffered on the foolish Oil Search transaction.

Statutory authorities, many of which are facing cash flow problems, are also still expected to pay dividends of K375 million. These numbers don’t seem credible.

On average in each of the last three years, revenues have fallen some K1,800 million short of the budget prediction for that year.

Based on past experience, I’d expect actual revenue outcomes to be down by well over K500 million on forecasts.

There are some real strengths in the 2017 supplementary budget. It demonstrates the declared intent to improve PNG’s budget crisis. As things are so bad, this cannot be a short-term fix. The medium-term planning for adjustment is welcome. Updates on the 100 day plan are welcome.

However, after going through the figures, the 2.5% deficit figure just does not seem credible. The International Monetary Fund thought the best possible outcome was a bit over 3% for the deficit. This would certainly seem to be the case after allowing for likely significant additional revenue shortfalls.

However, the greatest hit to credibility in this budget is the total silence in the treasurer’s speech on the actual treatment of the various support improvement programs. These represent 71% of proposed savings and there appears to be a major disagreement with the prime minister on them.

Clearly political power games are underway by the prime minister to get new members on the government benches. However, the supplementary budget indicates that the cupboard is too bare for these promises to be met (at least in 2017).

This moves the burden of proof of the government’s economic credibility to the 2018 budget. The people of PNG and international investors will look to the new Treasurer for better explanations and actions.

There is an easier and wiser course for PNG. If there is a chance that the new Treasurer can demonstrate to the international community that the government as a whole is willing to make the necessary adjustments, then there are prospects for many billions in additional funding to help ease the pain of adjustment.

This supplementary budget has just delayed some necessary hard decisions.