20 Apr 2009

PNG Government likely to forced to drastically cut back services by down turn

2:02 pm on 20 April 2009

It has been revealed that services provided by the Papua New Guinea National Government to departments and provinces may be cut by up to twenty five percent this year.

The newspaper, The National, reports that according to analysts, this is because the revenue projected for this year's budget will be down by that much, or even more.

The Government has just over one billion US dollars parked in trust accounts, but that is earmarked for one-off spending on infrastructure development.

The paper quotes the head of AusAID in PNG, Bill Costello, as saying PNG is well positioned going into the global economic crisis, with windfall revenue gains from high commodity prices, large balance of payments and public debt reduced to 30 percent of GDP.

But he says the Government revenue is heavily dependent on tax receipts from oil and mining projects, and PNG is suffering as the global economy contracts.

Mr Costello says the funds held in trust could help smooth falls in expenditure, but the problem is these funds were allocated to be used for one-off infrastructure investments, are not intended for recurrent expenditure.