18 Nov 2002

Economist says onus is on PNG to show it can trim costs and still grow the economy

5:48 pm on 18 November 2002

An economist with the Australian National University says it is up to the Papua New Guinea government to come up with a credible package that will overcome its financial problems.

On Friday an Australian Government Ministerial delegation rejected PNG's request that millions of dollars in loans be rescheduled to take some of the pressure off the country's budget.

Dr Satish Chand says the Australian move is understandable, and the ball is in PNG's court for it to devise a strategy to grow the economy and service its debt commitments.

Dr Chand says this will mean dramatically trimming spending at least in the medium term.

But he says the challenge for PNG is not to trim so much that the country's long term productive capacity is harmed.

"By that I mean, if Papua New Guinea happens to cut down spending on infrastructure, on law and order, on being able to grow their economy, then obviously they will never be in a position to meet all of their commitments for the future. I guess it's more trimming down spending on recurrent outlays particularly those on consumption."

Dr Satish Chand, who stresses that PNG is a solvent, resource rich economy.

He says the current problems are largely ones of cash flow.