ADB urges further expenditure reform for PNG

2:40 pm on 30 June 2016

Papua New Guinea's medium term economic outlook is fairly strong despite current challenges, according to the Asian Development Bank.

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Photo: RNZI

The ADB indicated PNG was still seen by the private sector as a growth market, but that downside risks are significant.

Recently, PNG's economy has been feeling the pinch due to the slump in global commodity prices, an increasing rate of debt and a sharp rise in the cost of debt among other factors.

An ADB representative in PNG, Yurendra Basnett, said further re-prioritisation of expenditure would help the government to close the gap in public finances.

"Without a public finance reform or implementing some of the policies that the government has outlined in its expenditure plan, any additional debt begs the question how it's being utilised, whether it's being driven towards productive sectors or not."

Dr Basnett said PNG had a need for increased productivity across a range of sectors.

He said in order to increase productivity, focus needs to be extended to underlying issues such infrastructure provision.

While PNG's O'Neill-led government has prioritised infrastructure projects, particularly Port Moresby, Dr Basnett hopes to see more long-term and rural-based infrastructure provisions to help foster connectivity and grow the contribution of sectors like agriculture to the national economy.

He said that in its 2016 budget the government had identified a medium term fiscal plan which it is mainly confident in, although baseline figures where the plan starts from were slightly off-mark.

Therefore, Dr Basnett is urging a more effective expenditure plan.

"These measures, which are already out there, in my view, stated by the government's policy documents, if they are implemented in a timely manner, would start un-winding the situation. The slower it takes to implement those measures, the longer some of these pressures stay."