Another deficit budget on the way


THE Budget Strategic Paper released indicates the Marape Government is expected to hand down a K6 billion deficit budget in the November sitting.
This is prompted by, again, an increasing expenditure budget of over K21.8 billion with only K15.7 billion in revenue.
This is a very worrying trend where when the economy is shrinking fast, with revenue streams drying while the Government, on the other hand, is on a spending spree.
Why increase expenditure when the economy is in recession?
Unless, of course the expenditure budget is tied to capital investment and infrastructure that can stimulate the economy and bring economic returns.
But that is hardly the case because on paper, it says “capital works” but, in reality, there is no new major infrastructure anywhere in the country apart from the ongoing projects of the previous government from loans secured with the Asian Development Bank, Exim Bank and others.
This raises the question on Prime Minister James Marape’s level of competence and knowledge in financial management.
Notwithstanding his experience as finance minister in previous cabinet’s, the Mid-Year Economic Fiscal Outcome (MYEFO) reveals a daunting story.
When the world’s economy is slowing down and countries are taking stock of their spending, the Government has been increasing spending since 2019 as per the MYEFO.
Expenditure in 2019 is over K18 billion; 2020 – K19.3 billion; 2021- K20.2 billion; and, 2022 is K21.8 billion.
These are, by far, record spending under difficult economic circumstance – declining in revenue situations.
While revenue, on the other hand, completely missed projected targets: in 2019, K13.6 billion; 2020 is K12 billion; and, 2021’s projected revenue is K13.6 billion.
But they will not meet the target and budget estimates.
For 2022, it is K15.7 billion, another increase when they are continuously missing targets.
All these years they’ve been setting higher targets in revenue and not even falling near it.
Now what it simply means is that when you have lower revenue and higher expenditure, your deficit level go up.
The difference between this two is what they call “deficit”.
And deficit is something you need to finance.
And that means the Government will go, again, and borrow money to finance this deficit.
Numbers and information maybe boring but they do not lie.
So, to conclude, let us look at the deficits.
In 2019, the deficit was close to K4.6 billion, and in 2020, the deficit was K7.3 billion.
In 2021, K6.6 billion and 2022 will likely be over K6 billion.
When we add up all the deficit, it will show PNG is borrowing close to K22-K25 billion to finance the unnecessary expenditure and spending.
What it simply means is, the Government is forcing us to live beyond our means.

David Lepi