Deficit budget

Main Stories, National

The National, Monday November 11th, 2013


THE Government will hand down a deficit budget for 2014 focused on economic growth and developing infrastructure for the 2015 Pacific Games, official sources say.

Prime Minister Peter O’Neill said the deficit budget would be between 5% and 6% of Gross Domestic Product. It may raise the national debt level to around 35% of GDP.

He corrected a television news story that said the country was expected to pass a budget deficit of 35% of GDP. 

In a text message, O’Neill said: “The TV report is wrong. The total deficit is not going to be around 35% (of GDP). We expect a deficit of around 5-6% of the total GDP (US$17.430 billion)”.

Finance Minister James Marape said a minimal deficit to grow the economy was healthy. 

He said to build infrastructure such as roads, bridges and the 2015 Pacific Games infrastructure growth “is good for the nation”.

He said the budget would not pass the 35% debt-to-GDP ratio. He said it would be a manageable deficit budget “that is good to grow the economy”.

Treasurer Don Polye, right, who will table the 2014 national budget in parliament on Tuesday week, had confirmed it would be a deficit budget such as the 2013 one “but will be a manageable fiscal deficit”.

He said it would grow the economy and  continue to be a fiscal budget with a very respectful fiscal limit, with a manageable debt. 

The PNG economic briefing from the World Bank group in the country reported that the country was expected to reach a budget deficit that would raise debt to around 35% of GDP by 2014.

This is compared to the gross public debt near 25% of GDP in 2012 (not including contingent and off -balance sheet liabilities, estimated at a further 15% to 20% of GDP). The 2013 budget deficit of 7.2% was one of the highest since 1990. 

It was 9.5% deficit in 2009, during the global economic crisis. 

The good news is that the World Bank report said in 2015, the government expected a 26% increase in nominal GDP (as the PNG LNG production starts) will return the debt-to-GDP ratio to below 30% of GDP.