4 Dec 2013

Signs of prudent financial management by PNG government

8:17 pm on 4 December 2013

Under fire on a number of fronts related to the management of the economy and public funds, Papua New Guinea's government has been praised for its financial prudence in some areas and long-term economic planning.

The Peter O'Neill-led government tabled the 2014 national budget last month, PNG's biggest ever at 15 billion kina, or US$5.6 billion.

While for the second consecutive year the PNG budget is running a large deficit - at around US$900 million - the Treasurer Don Polye says the government is setting foundations for PNG's future growth.

Johnny Blades has more:

The remarkable economic growth that PNG experienced over the last decade slowed down over the past year. With the depreciating kina and shrinkage of capital inflows as construction of the major LNG gas project nears completion, PNG's government has had to tighten up on expenditure. Paul Barker of the Institute of National Affairs says this and the decision to step back from committing to a six billion kina Chinese soft loan showed some prudence on the government's part.

"PAUL BARKER: Especially when the debt level in 2013 and forecast again in 2014 is going to be very substantial in relation to GDP, so it's rising up to the 35% of GDP level for 2014, as per the budget. And that's excluding the borrowings in relation to LNG and other outside budget transactions, for example debts to the superannuation funds and so on."

The previous budgetary year was coined "the year of implementation" by the government but, as the deputy opposition leader Sam Basil says, a number of big planned projects never get off the ground.

SAM BASIL: The supplementary budget was to the tune of 385 million kina. That money, they said it was from unspent money from the implementation of projects. So that clearly shows that the government implementation has failed and there was money to pull out of the other projects. But the government failed to tell us which projects were affected when they redirected the 385 million kina into the Pacific Games village money.

Paul Barker feels the government has learnt lessons in 2013 over the need for capacity to plan the major increase in the budget and implement it effectively. But he says the lack of proper competitive tendering and accountability for major public projects is a concern.

PAUL BARKER: From a survey of business and investment in Papua New Guinea one of the major areas of concern, apart from the whole management of land administration, has been the administration of supply and tenders.

Peter O'Neill says his government has embarked on a new economic direction for PNG, following the state-oriented path of many Asian countries. The government has forged stronger economic links with countries like Indonesia, particularly through collaborative projects around the common border, which Adam Vai Delaney of the National Research Institute says reflects long-term thinking.

ADAM VAI DELANEY: If we can address the trade issues, the movement issues, and actually look at the relationship a little more broadly, it makes more sense for bilateral discussions to talk a little bit broader about the socio-economic issues that can move that particular area forward.

Meanwhile, PNG's budget deficit is expected to improve once production in the LNG project commences in 2014.