The Papua New Guinea Treasurer Patrick Pruaitch says an early supplementary budget is likely.
This follows the release of the Mid-Year Economic and Fiscal Outlook report 2016 by the Treasury Department, which recommended such a move.
The Post Courier reported Mr Pruatch said the outlook sent an early warning of the need for the government to rein in spending.
He said the advice was to cut $US500 million from the 2016 Budget due to further declines in economic growth, commodity prices and the exchange rate.
Mr Pruaitch said if they did not take action the budget deficit would reach 5.9 percent of GDP.
The paper reported him saying economic growth was lower than projected due to the impact of the drought and frost conditions caused by the El Nino weather phenomena, low commodity prices and foreign exchange issues in the domestic market.
Meanwhile the country's inflation rate had climbed slightly to 6.6 percent.
Mr Pruaitch said an early supplementary budget would provide confidence in the government's fiscal policy, help maintain investor confidence and help stabilise the kina.
The opposition leader Don Polye said he welcomed the move by the Government to introduce a supplementary budget, which he had been calling for earlier in the year.
"However, the budget has lost its utility, given that the prime time for project implementation is about to lapse and the preparation for the next budget is only months away. It should have been introduced earlier," he said.
Mr Polye has called on the government to consider pulling a plug on new projects like Western Pacific University in his Ialibu-Pangia district and Enga Hospital among others, which he said were 'political projects'.
Mr Polye described the projects as wasteful and said the government should concentrate on improving the deteriorating state of PNG's universities and hospitals.