BPNG raises concern on fiscal deficits

 THE Bank of Papua New Guinea has raised concerns about the Government’s 2016 budget.

The concerns include fiscal deficits, national debts and the effects of commodity prices against the Government’s targets in the petroleum and mineral sector.

Governor Loi Bakani, pictured,  said the Government’s price forecast of US$60 (K176) per barrel for oil and US$12 (K35) per mmbtu (million metric British thermal unit) for LNG were on the high side and that the revenue targets might not be achieved.

“In November 2015, Parliament passed the 2016 Budget with a planned total expenditure of K14.8 billion, which is 2.4 per cent lower than the 2015 Budget estimate, and revenue of K12.7 billion.

 “The K12.7 billion revenue is expected to be largely driven by the mineral and petroleum tax. 

“Since the release of the 2016 Budget, international prices for mineral and petroleum have dropped further and are forecast to be even lower.

“The IMF (International Monetary Fund) forecast for the two commodities are US$42 (K123) per barrel and US$9.5 (K26) per million metric British thermal units (mmbtu) in 2016.”

Bakani said it was crucial for the Government to cut and reprioritise its expenditure if there was revenue shortfall.

He pointed out that with the accumulation of national debt to around K16 billion, money borrowed by the Government should be spent on productive and quality investments to grow the economy with more emphasis on the agriculture and the export sector as well as tourism.

“This should lessen the burden on future debt repayments and avoid more financial resources being diverted away from productive investments to debt repayments.”

The bank had also cautioned the State to manage its budget to ensure it spend on actual revenue and available financing this year.