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Poll spending trend a
worry
By BRIAN GOMEZ
GOVERNMENT spending in Papua New Guinea
rises by around 48% in the third quarter before a national election and
by 17% in the final quarter, according to a study published by the
International Monetary Fund (IMF).
The study showed that in the quarter after the election, government
expenditure dropped by around 46%, with development expenditure
plummeting 68% in the third quarter after an election.
A ground-breaking study has been published by IMF resident
representative in PNG Ebrima Faal, covering the period from 1988 to the
first quarter of 2004, when three parliamentary changes and four changes
of government occurred.
Suitable quarterly data on fiscal operations were unavailable prior to
1987.
The study, published together with the IMF’s recently completed annual
assessment of PNG’s macroeconomic policies, is the first statistical
study on the impact of national elections on Government spending.
The paper titled Political budget cycles in Papua New Guinea, said
frequent changes of government in PNG “has created a class of
politicians and Members of Parliament who are myopic in their outlook
and who, because of short political cycles, are prone to rent-seeking
activities”.
Discussing the reciprocal relationship between voters and elected
representatives, Mr Faal said that generally voters “want and demand
tangible benefits such as roads, schools, hospitals etc, while MPs want
re-election”.
An MP’s success, he said, was based on how often tangible services were
brought to the community. This has recently included provision of
personal benefits to individual constituents.
“As a result, a major preoccupation of Members of Parliament is to
obtain portfolios in the government that allow them to disburse benefits
to voters in their own constituencies.
“From a strategic perspective, therefore, it is advantageous to be in
the ranks of the government, where control of the public purse confers
those benefits than those in the Opposition or backbenches who do not
enjoy them for their constituents.
“The concern with immediate material returns from elections is
underlined by the introduction, continued existence and importance of
MPs’ discretionary funds.
Mr Faal said the impact of the introduction of the Organic Law on
Integrity of Political Parties introduced by the Mourata Government,
which came into effect in 2002, needed to be tested further.
Election-related spending was financed in part through domestic
borrowing and reflected a preference to manipulate expenditure rather
than taxation.
Governments in the past have overdrawn balances in excess of deposits
with the banking system so that net government claims as a percentage of
gross domestic product have increased on average by 16% in the quarter
just before the election.
The evidence suggests this is not reversed in the post-election period,
Mr Faal said.
He said the “evidence of opportunistic business cycles in PNG” was
consistent with political models of other international researchers and
“showed a clear pattern of pre-election manipulation of fiscal
instruments by incumbent governments”.
This mainly involved increased development expenditure and overall
primary expenditure followed by cutbacks after the election period.
The study noted: “The evidence also shows that credit to the government
increase in post-election years, as politicians seek some means of
financing their election year extravagance.
“A broader implication of these findings point to the potential
incompatibility between the pressures motivating the political business
cycles and ongoing efforts on economic and political reform, including
the objective of long-term fiscal sustainability.”
 
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