The first National Budget of the returned Marape Government predicts record government revenues and expenditure in 2023, with significant increases in spending on infrastructure, law and order, education and health.

Treasurer Ian Ling-Stuckey

Last week, Treasurer Ian Ling-Stuckey introduced Papua New Guinea’s 2023 National Budget ‘the largest in PNG’s history’, with record total expenditure of K24.567 billion – a 10.8 per cent increase on the original 2022 Budget.

Total government revenues were also a record, at K19.582 billion – a 20.9 per cent increase on the previous year.

The budget deficit of K4.985 billion was not a record, however, but was 16.6 per cent less than the deficit recorded this year.

The Treasurer restated his commitment to returning the budget to surplus by 2027 and bringing the country’s debt-to-GDP ratio below 40 per cent by 2029.

‘Our budget deficit has nearly halved since the global COVID-19 pandemic did so much damage to our budget in 2020,’ Ling-Stuckey told Parliament.

Economic growth

The Budget predicts the PNG’s economy will grow by 4.0 per cent next year, with non-resources growth at 4.6 per cent and resources growth at 2.0 per cent.

Budget papers suggest economic growth in 2023 will be led by the mining and quarrying sector (including a reopened Porgera gold mine, now identified as likely to reopen in the second quarter of 2023), the agricultural sector and the wholesale/retail sector. The oil and gas sector is set to contract by 7.2 per cent due to a ‘substantial downgrade in condensate and LNG production’.

While the budget anticipates the reopening of Porgera, its projections do not account for the possibility of future major resources projects Papua LNG and Wafi-Golpu, as final investment decisions on these two projects are yet to come.

Infrastructure spending

A major component of government spending will be on capital expenditure under its Public Investment Program. In 2023, K6.615 billion is planned to be spent in 2023, an increase of 8.6 per cent on 2022.

This will be augmented by a further K2.025 billion in donor grants and K1.156 billion in concessional loans, bringing total capital investment up to K9.796 billion – a record high.

Key projects funded under this program include Connect PNG, the ambitious plan to develop the nation’s roads and integrate them with centres of production and economic activity. The government has committed 5.6 per cent of the national budget to this program annually, which will amount to K1.375 billion in 2023.

The Budget also allocates significant funding increase for law and order, health and education, with 2000 more police to be employed by 2026, and 20,000 new teachers and 7300 new healthcare workers by 2027.

Funding increases have also been secured for rural agencies such as the Fresh Produce Development Company, the PNG Coffee Industry Corporation, the National Agriculture Research Institute, the PNG Cocoa Board, Kokonas Indastri Koporesen and the new Livestock and Development Corporation.

Tax changes

Perhaps the most unexpected measure was the announcement of a 45 per cent tax on the profits of PNG’s commercial banks, which will replace the Additional Company Tax this year levied solely on BSP Financial Group.

‘It comes at a time when some financial institutions are exploring the possibility of a banking licence, so it remains to be seen whether it will dissuade new players to the banking market,’ KPMG notes in its Budget review.

In other measures, the tax-free threshold for individuals will be temporarily increased to K20,000, while the temporary GST exemption on fuel will end on 31 December, and the fuel excise exemption will end on 30 June 2023.

Foreign exchange

The budget papers report ‘buoyant’ international reserves, which look to grow further in 2023, up to K13 billion. However, Treasury acknowledges the delays still being experienced by businesses seeking foreign exchange. A planned program with the IMF, it says, will focus on ‘improving FX imbalances, including options to increase the efficiency and transparency of FX allocations.’

2023 National Budget: Key projections

• GDP growth: 4.0 per cent (2022: 3.8 per cent)
• Government revenue: K19,582 billion (up 12.6 per cent)
• Government expenditure: K24,567 billion (up 10.8 per cent)
• Budget deficit: K4.985 billion (down 16.6 per cent on 2022)
• Inflation: 5.7 per cent
• Foreign exchange reserves: K13 billion (by end of 2023)