By MARK HAIHUIE
The Government is targeting deficits equal to 2.5 per cent of gross domestic product in 2018 under its fiscal consolidation strategy, according to the recently-released Asian Development Outlook.
This will be a challenging task as expenditure has increased to cater for Asia-Pacific Economic Cooperation meetings and will be made more difficult with the reconstruction costs of the earthquake this year.
“While budget expenditure is forecast to increase by 14.7 per cent in 2018, partly to pay for Apec preparations, the Government intends to counter it with a 16 per cent increase in revenue,” the report said.
“According to budget projections, over half of increased revenue is expected to be higher dividends from State-owned enterprises and one-off balance transfers from State authorities, such as the National Fisheries Authority.”
The report said further revenue was expected to come from improved revenue collection as well as higher tax collection resulting from Apec activity this year.
“Achieving the deficit target is likely to be a challenge, raising the prospect of mid-year budget revisions, as have occurred in recent years,” it said.
“An additional weight on the budget will be Government expenditure on relief and reconstruction following the recent earthquake.
“To finance the deficit, the Government is looking to external financing from multilateral organisations and international markets, and it is considering a sovereign bond issue.
“Development partner transactions in the pipeline worth about US$600 million are likely to bring funds to PNG in the forecast period.
“Financing from domestic sources, which accounts for 72.8 per cent of Government debt, has become increasingly tight as some foreign banks operating in PNG have hit ceilings for such investment.”
By MARK HAIHUIE