Embattled PNG Govt encouraged to broaden economy
The PNG government is promising a supplementary budget and is being advised to take a long term view and look to diversify the economy from its mineral resource dependency.
After widespread concern the Papua New Guinea Government says it will bring in a supplementary budget as the economy nosedives.
Government revenue is set to drop by more than 20 percent this year with the budget deficit more than doubling to 9.4 percent.
In a statement the PNG Treasurer, Patrick Pruaitch, says the Appropriations Reduction Bill will not impact on priority areas such as education, health, law and order, and provincial and district support grants.
He says the move will ensure a lower deficit and that the debt to GDP ratio is not greater than that allowed under the Financial Responsibility Act.
A visiting fellow at the Development Policy Centre at the Australian National University, Paul Flanagan, told Don Wiseman they should consider a multi year budgeting package.
PAUL FLANAGAN: It needs to include both the expenditure side, the revenue side and thinking how you can finance the differences. It means thinking about what is the appropriate role of government. Are their certain functions that we should actually pass across to the private sector and let the government concentrate on areas of higher priority such as education and health. So these are pretty big discussions that need to occur within PNG and they did this at the end of the 1990s. Given these challenges they actually set up a group of people with international experience also to sort of come and discuss some of those challenges.
DON WISEMAN: Why is it that a whole lot of those non-resource sectors suffered falls?
PF: A lot of the growth that had occurred in PNG in the non-resource sector is still linked to the massive investments of the PNG LNG project. So they essentially finished towards the end of 2013 early 2014. So a lot of the links, construction industry and that within PNG. just lost a lot of its, those contracts. The level of employment in PNG related to the project peaked well over ten thousand so current employment numbers in that project are now closer to a thousand. So it is a series of flow on implications to the economy from moving from the investment phase of the PNG LNG project to what is called the production phase. And ironically the very large growth numbers you see in PNG which are very impressive in world terms 13 percent last year, now 11 percent this year, like these are very, very high. But if you actually look at that part of the GDP that impacts on people, non-resource GDP growth over the two years is only four and a half percent gross, which is less than population growth. So you are actually having declines in income in per capita terms even in the midst of the start up of this massive project.
DW: And that is happening despite this emphasis that has been for a number of years to try and make more out of agriculture and so on?
PF: So yes the agriculture and other sectors really have not picked up, they are facing other challenges you know, sort of issues around cocoa borers, problems in the coffee industry. But one does think that PNG may need to think of a more diversified and sustainable development set of policies and reduce the emphasis that seems to be there currently on the mineral sector. We know the vast majority of people in PNG - there is an estimated 3 million people living in absolute poverty in PNG. The way to benefit these people is to look much more into the agriculture sector, nutritional improvements. Arguably there should be more emphasis placed in those areas when the government is thinking about how to focus future development efforts.
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