Bank cautions government on fiscal policy

By SHIRLEY MAULUDU
THE World Bank has cautioned the Government to identify its fiscal policy going forward after the fiscal policy objectives and priorities the State identified in 2020 Budget are addressed.
Senior economist for PNG Ilyas Sarsenov made the statement during PNG economic update presentation in Port Moresby on Friday.
“What the World Bank see (is that) in the new budget parameters, there is a reversal in the fiscal policy commitments done previously by the Government,” he said.
“We do understand that there was a different administration in place but the medium-term fiscal strategy initially committed fiscal consolidation to be implemented by the Government over the medium term and bringing the deficit down.”
However, Sarsenov said due to negative developments in the economy, they understood that there was a temporary reversal in fiscal policy so the current administration decided to increase spending, especially on physical infrastructure which would result in a higher deficit of the budget in the coming years.
“This will mean that borrowing by the Government will be higher,” he said.
Sarsenov added that last year, according to World Bank estimates, debt to GDP (gross domestic product) ratio was at 28 per cent.
“It will exceed 40 per cent of GDP level this year,” he said.