Economic analysts have welcomed the 2014 Budget, at K15.1 billion Papua New Guinea’s biggest ever, commending the government for its emphasis on implementing projects it announced last year.

PNG Treasurer Don Polye

PNG’s Treasurer Don Polye announced the Budget on Tuesday.

‘Overall, it’s a “steady as she goes” Budget,’ Aaron Batten, Country Economist with the Asian Development Bank, told Business Advantage PNG.

The Director of the Institute for National Affairs, Paul Barker, described the Budget as ‘predictable, containing no great surprises, and one of consolidation’.

‘It maintains the momentum of the 2013 Budget, focusing on infrastructure, health, law and order, education and the districts,’ says Barker.

‘And it does that within the government’s deficit reduction target, keeping the deficit at 5.9% of GDP which is what they planned last year,’ observes Batten.

Emphasis on implementation

Asian Development Bank Country Economist, Aaron Batten

He adds there’s a really big shift to measures associated with implementation rather than big expenditure increases.

‘I think the 2013 Budget has shown that it’s one thing to allocate a lot of money to big projects but it’s another to actually deliver that project and the key focus of this Budget really seems to be around implementation.’

In their analysis of the Budget, Deloitte partners Lutz Helm, Bouke Wagenaar and Noel Smith, say the Budget aims at ensuring capital expenditure is matched to appropriate maintenance and upgrade programmes.

‘All three central ministers—Planning, Finance and Treasurer—are very focused on this implementation issue. That bodes well for next year’s project delivery.’

Deficit

Batten is not concerned about the size of the deficit.

‘I don’t think there has been a blowout,’ he says.

‘The total size of the deficit is K2.3 billion, which is about 5.9% of GDP. Now, that level of deficit is in keeping with the medium term fiscal strategy target.

‘It keeps the total level of government debt at or below 35% of GDP. So I think they’ve done quite a commendable job to keep spending at that level, which is generally sustainable by PNG standards.

‘Having said that, reining in expenditure growth will be vital in the coming years if macroeconomic stability is to be maintained.’

New commitments

‘There are some new infrastructure commitments. The major one is the major towns initiative, where they are focussing on infrastructure development in Mt Hagen, Port Moresby, Kokopo and Lae, to set up different industrial and growth centres.

‘And of course, the 2015 Pacific Games brings new expenditure pressures.’

Deloitte’s partners point out the government wants to prioritise the business environment for the agriculture sector as well as small and medium enterprises.

‘The big focus by the planning minister in particular is on the importance of diversification in the economy and the need to move away from just being and oil, gas and mining economy,’ says Batten.

‘ADB certainly agrees with that because agriculture and other non-mineral parts of the economy is where the majority of employment and cash income is earned.

Unspent money

Almost half the funding that was allocated in last year’s revised Budget to the Public Investment Program—about two billion kina—has not yet been spent.

‘So they’re looking to streamline the government system and they’re looking to invest in the capacity of government both at the national and the sub-national level so that’s a really positive change in the dialogue of government and the story they’re telling,’ says Batten.

‘All three central ministers—Planning, Finance and Treasurer—are very focused on this implementation issue. That bodes well for making some improvements in next year’s project delivery.’

The 2014 Budget in a nutshell

• Expenditure: K15.3 billion
• Deficit: K2.6 billion or 5.9% of GDP
• Total public debt: K14 billion
• Debt to GDP ratio: 35%
• Domestic debt: K10.5 billion (19.5% increase)
• Forecast growth for 2014: 6.2% (world growth estimate 3.6%)
• Forecast growth for 2015: 21.2% (due to LNG coming on stream)

Income

• Grants from development partners: K1.555 billion (10% of expenditure)
• (Australia’s contribution: K1.206 billion or 78% of donor grants)
• Mining taxes: K1.002 billion

Key spending items

Infrastructure

• Roads: K1 billion
• Lae Port Development (Tidal Basin) – K270m
• Jackson Airport Expansion – K30m

Law and Order: K1.3billion (26.7% increase)

Education: K1.5 billion (11.8% increase)

Health: K1.4 billion