Basil clarifies country’s fiscal, economic outlook

TREASURER Samuel Basil says the half-year score card of the country’s fiscal and economic outlook shows the extent of the short-term liquidity challenge facing the government.
Basil explained that this should not be confused with the decline in the economy or an error in the 2019 Budget.
He announced that the mid year economic fiscal outlook (MYEFO) report for 2019 had been released and published on the Treasury department’s website (treasury.gov.pg).
“The short-term liquidity challenge has been caused by the delay in the receipt of certain key large payments including dividends, financing from multilaterals delayed due to slower actions by some departments and delays in external loan discussions in terms of Sovereign Bond and China,” he said.
Basil said these delays in receipts, combined with an unexpectedly larger spending in December than originally planned or forecast, had meant that there was less cash now than expected but there would be more at the end of the year than expected.
“Normally, the government would fill this gap with short term borrowing from the domestic market but that is not currently possible because there are limited funds available domestically and the cost is very high, hence, some monies have been borrowed domestically but not enough to cover the full amount of the shortfall,” he said.
“Therefore, this is not a challenge brought about by a decline in the economy or even an error in the budget.”
The government is currently exploring options to resolve the current temporary liquidity shortfalls as well as ensure that when delayed receipts did come in at year’s end, spending did not overshoot again thereby causing the same problem next year.
“The government remains committed to resolving our current short-term liquidity challenge and the administrative issues behind them,” Basil said.
“As Prime Minister James Marape had said, we will address this without resorting to desperate measures and high cost loans.
“We will seek low cost alternatives that can also be used to retire more expensive domestic debt and stabilise our foreign exchange inflows.” Basil said despite these short-term issues it was worth keeping in mind that the fundamental outlook for the economy, especially in the medium term, remained strong.
“We should expect greater income from the PNG LNG as the period of accelerated depreciation comes to an end,” he said.
“These receipts combined with the investment flows from the Papua LNG suggest that the medium-term outlook for our country remains strong.
“This government intends to use these monies to develop the economy for the benefit of all Papua New Guineans, so that in the future we become less dependent on the mineral sector and borrowing to finance our nation’s development needs.”