National Government finances continue to spiral out of control because of the government’s inability to implement policies to deal with high budget deficits and record public debt,Opposition Leader Patrick Pruaitch said today.
Mr Pruaitch said that after the highly damaging 0.6% contraction of the economy last year, there is little hope PNG can attain 4.4% growth, as projected in last week’s Mid-Year Economic and Fiscal Outlook.
PNG Treasurer Sam Basil disclosed that the budget deficit in the first half of this year has risen to K1.67 billion after government spending soared to K7.5 billion. The deficit is forecast to hit K2.4 billion, K506 billion above the budgeted figure for the year.
“The deficit forecast is extremely conservative,” Mr Pruaitch said. “Due to lack of government controls,particularly over personnel emoluments that have been grossly under-estimated, the deficit could increase to a debilitating K3 billion.”
The 2019 MYEFO forecast that public debt is anticipated to reach an all-time high of K28.1 billion by the end of this year, assuming that the fiscal deficit is contained at K2.4 billion. Some K6 billion in debt owed by State Owned Enterprises has not been included in this estimate.
Mr Pruaitch said: “The Government raised K374.9 million through short-term Treasury Bills in the first half of this year and was forced to use an additional K1.3 billion, effectively depleting its previously raised US$500 million Sovereign Bond.
“Now the Marape Government is seeking extremely expensive borrowing this year of an additional US$500 million from Credit Suisse.
“In all likelihood GDP growth will remain considerably below 4.4%. With no changes in policy direction, this government is destined to perpetuate previous trends that resulted in falling average incomes. Sadly, the recent upturn in employment is also likely to become negative once again.
“Already the resources sector,where employment grew by 24.4% in the December quarter last year, could see reduced employment levels following the recent retrenchment of workers at the Wafi Golpu project, and deceleration of activity at the Papua LNG Project.
“Government expectations of an economic boost from LNG exports is unlikely to eventuate since it is based on production gains following the fall in production caused by last year’s earthquake. Treasury has taken little account of deteriorating international market conditions due to the current global economic slowdown.”
Noting that the Marape Government has said much about its desire to increase government revenues to K15 billion, Mr Pruaitch noted that Mr Basil had forecast the goal of raising government revenues to 14% of GDP by 2022.
“This is a strange wish. Does the Treasurer really want government revenues to go backwards and to fall in the intervening period?
“According to the 2019 MYEFO government revenue, as a percentage of GDP, hit 17.1% in 2018. It is estimated by MYEFO to fall to 15.8% this year compared with the 2019 budget forecast of 16.1%.”
Mr Pruaitch said government fiscal policies have also been adversely impacted because budget support of US$300 million (K960 million) expected from the China Development Bank will not be available for budget support, but only for “an approved list of projects”.