By Gedion Timothy
TREASURY Secretary Dairi Vele says revenues from the PNG LNG project are expected to flow to the State around 2020 after investment costs have been paid.
Vele was giving an update on the establishment of the Papua New Guinea Sovereign Wealth Fund (PNG SWF) – a mechanism for saving windfall revenues, especially from the extractive sector for future use.
He said the current situation faced by the economy in terms of falling oil prices and the impacts of the droughts on other significant commodities would greatly affect the revenue flows from the mining and petroleum sectors.
“Simultaneously, revenues from the PNG LNG project are not expected to flow to the State until around 2020 after payments have been made on the investment cost,” Vele said.
“As a result, the inflows are expected to be substantially lower than forecast. The Government however expects some dividends to be paid by State-owned enterprises into the SWF.”
He said the establishment of the SWF was a significant achievement for PNG.
“It will demonstrate to the global community, PNG citizens and international friends of the Government’s commitment to ensuring prudent fiscal management particularly in the management of mineral (and petroleum) revenues generated from the country’s extractive industries,” he said.
“While the decline in commodity prices is having a significant impact on the SWF, it presents the opportunity for us to properly consider all the available administrative and operational structures or the models and other necessary adjustments currently in existence and used by the sovereign wealth funds throughout the region and internationally.”
Meanwhile Bank of PNG Governor Loi Bakani said in its monetary policy statement that the Government was expected to formalise the establishment of the administrative secretariat of the SWF at the Central Bank.
He said BPNG was working on developing a suitable model for the establishment of the secretariat.
“PNG will continue to face issues of low international commodity prices and other supply shocks to the economy,” he said.
By Gedion Timothy