By DALE LUMA
BUSINESSES have not seen the direct impact of the Government’s K5.6 billion economic stimulus because it was more of an alternative budget financing plan than a stimulus plan, an economist says.
Institute of National Affairs executive director Paul Barker told The National that “it must be recognised of what this plan comprised”.
- K2.5 BILLION Covid-19 Treasury bonds to finance the Budget (including the initial K45 million for the Covid-19 health preparation and other interventions);
- K0.6 BILLION for loan holidays (basically at the expense of banks giving temporary relief to business and households borrowers in the face of the Covid-19 factors);
- K500 MILLION from the Superannuation funds to provide prompt support to their members temporarily or permanently put off work;
- K1.5 BILLION from the International Monetary Fund, Asian Development Bank and World Bank for Budget funding (and also to replace costlier commercial borrowing);
- K500 MILLION for health (K175 million), security (K50 million) police and defence (K35 million);
- K250 MILLION for the rural sector and business relief.
Barker said Australia and other developed countries provided funding for their stimulus plans in schemes such as job-keeper and job-seeker and a wide range of business support leading up later to infrastructure public investment.
“In PNG, it was more about shifting the composition of the Budget (which dropped extensive operating expenditure and most capital expenditure, which couldn’t be undertaken during the pandemic),” he said.
“It was to reduce the total Budget appropriation, to downsize it to better fit with the heavily reduced revenue, to secure alternative financing for the Budget, including low interest international concessional loans, plus commercial domestic loans, and securing superannuation fund contributions for early payouts.”
Barker said apart from the early release of K45 million, details of the breakdown of the K500 million to health, police, defence and rural/SMEs was required, including K70 million for health procurement from World Bank funding.
“Some funds were provided through the banks to selected clients to ease their stress, and helped them sustain livelihoods in the face of the restrictions,” he said.
“Substantial funding was released through the districts, using the DSIP mechanism, which is a notoriously deficient and unaccountable vehicle, but which in some cases will have provided some useful output and relief measures.
“A large portion of this stimulus plan entailed requesting superannuation funds to release funds early, as allowed for through an amendment to the Act, but as they amendment took several months, by then the normal fund release arrangements had already kicked in.
“Tax revenue was expected to fall by K2 billion, so alternative sources were sought, but of course, if the Budget wasn’t substantially funded from somewhere.
“There would have been a much more serious cut in public expenditure, with Government unable to pay salaries and wages and government bills, with much more serious economic and welfare consequences.
“Only K250 million was specifically earmarked for relief, including to SMEs, and clearly the mechanisms through financial institutions and district arrangements were not set up, and therefore, would have been very selective, as determined by various decision-makers, in the districts and institutions, including banks.”
Barker called on Treasurer Ian Ling-Stuckey to explain what became of the envisaged K600 million for loan relief, and whether this was applied by the respective banks and on what basis and if so, whether a financing contribution was provided by the Government and on what basis and to whom.