Transcript
PAUL FLANAGAN: The Government in the Budget is painting quite an upbeat picture. Not only over the next year but if you look out over the course of the five years their projections are of very, very strong growth in the economy. Like they have got numbers of the economy growing by close to ten percent by 2022, so this is a very very upbeat assessment of how the PNG economy is going and in that context they feel as if they can rapidly increase expenditure, because they believe they will be getting a lot more revenue.
DON WISEMAN: Can they justify that?
PF: So the language is good, the language looks like that but when you start looking at some of the numbers unfortunately there are some serious concerns. Those upbeat numbers on the economy, those numbers disagree with their own National Statistics Office. Their starting point 2015, which the government should have incorporated into the projections is actually ten percent less. The numbers that they are incorporating, as I say, like including figures of near 10 percent on growth is quite risky because what you then do is you start pushing up your expected levels of revenue. And when you push up your revenue there is a tendency for government to spend that money. And the question is whether that money is being well spent in PNG.
DW: In terms of inflating projected growth PNG has been down this road so recently and it didn't happen - doesn't seem to have been a lesson learned there?
PF: So that's a lesson from just a few years ago. What's even more extraordinary is the agreement that PNG had with let's say the World Bank, to get the Budget support - two months ago in the 2019 Budget strategy Treasurer Abel indicated they expected what they are using as a deficit measure now would be some 592 million kina. This Budget indicates that’s blown out to But it's to over 1.5 billion kina. So they have had a billion [kina] revenue in their resource sector in the last few months. They were supposed to save that but instead they have gone and spent it. So contrary to agreements with the World Bank andf others that they would try and save any resource windfalls to get out of the boom/bust cycles that they have seen before, they have decided to go and spend those funds. This is a very risky strategy, especially with a very upbeat view of the economy.
DW: We know that right across government departments in PNG they have struggled, education and health. There's significantly more money for education. Is it enough to pull them out of those problems?
PF: Umm..Actually looking at the figures there has been a small increase ihn education, just enough to cover off expected inflationary impacts. Health has actually gone backwards slight, and if you compare Budgets from 2015 to 2019 and allow for the impacts of inflation, then areas such as education have actually been cut by nearly 30 percent, the figures about 17 percent for health.
DW: That is not how the government is representing it though.
PF: No and the big gainers from this particular Budget is, number one, there has been a very significant in infrastructure spending, which is a positive thing if it is done well. There have been additional finances going to support water and energy and that can be done. That's positive if done well. But the other winner, by far the largest winner in sort of tender terms is the administrative sector and this potentially reflects a very interesting power shift because the electoral funding that had gone to local MPs and the provinces, these programmes called the DSIP Programmes have been moved from the provinces to one of the departments, the Department of Implementation and Rural Development. That represents a significant power shift within PNG.
DW: Alright so overall is this Budget going to achieve what the government hopes it might achieve?
PF: It's a risky Budget. You would have to describe it as a risky Budget. They have bet once again that this resource boom that they are going through at the moment will continue and they are betting on the fact that they have in part broken trust with the people who have just provided them with budget support - they received 500 million kina in a sovereign bond raising two months ago. So when they went out.
