| EMTV Online | Edited
PORT MORESBY - The Papua New Guinea government is projecting a tough year in 2020 as it contends with a shrinking economy and a K4 billion budget deficit.
Treasurer Ian Ling-Stuckey has handed down a K18.7 billion budget whilst issuing a scathing attack on former prime minister Peter O’Neill for what he described as the “mismanagement of the PNG economy”.
“Why does this nation have a massive budget deficit?” Stuckey asked. “The honest answer is a simple answer. PNG has the largest budget deficit because of the economic mismanagement, the irresponsibility and the deceptions of the former prime minister, Peter O’Neill.
“Every year, the average living standard went backward by over K100 per person.”
Ling-Stuckey is not expecting 2020 to be flowery for Papua New Guineans. The budget strategy paper paints a bleak picture of an economy depressed and struggling with debt.
The budget includes a 50% cut to the tuition fee free education (TFF) policy, stringent debt servicing measures, tighter control on the government salaries and higher taxes.
Citing the cuts to education, Ling-Stuckey said it is a shared responsibility and funding will be directed towards the costs of higher education which are a lot more burdensome to Papua New Guinean families.
The government has been careful not to press too hard on revenue sources like the goods and services tax and personal income tax.
But it has introduced a 25% ‘sin tax’ on tobacco and alcohol and maintained the 100% tax on imported vehicles. Other tax reform measures include a simplified tax regime to help small to medium sized businesses.
In its post budget analysis, international consulting firm KPMG highlighted that export tax revenue is expected to be boosted to K425 million as a result of increases to excise duties on the export of unprocessed logs.
Commenting on the budget, former treasurer Charles Abel cautioned the government over the possible substitution effect as a result of the tax increase on alcohol and tobacco.
“We have a massive problem with illicit trade,” Abel said. “One of the main reasons is because they are so highly taxed. As Treasurer, I slowed down the rate of excise increase (not stopped altogether) and revenue from tax collected went up and illicit trade went down.
Ling-Stuckey also highlighted that PNG’s employment market is not looking good in 2020.
He reiterated estimates by the World Bank and the Asian Development Bank that formal job creation has dropped from an average of 15,000 a year to 10,000 over five years.
He said the government will have to pick up the pieces and gradually raise that figure to an acceptable level.