Economic stimulus package to impact national budget: Report

The National National

THE economic stimulus package announced by Government will have direct and indirect impacts on the 2020 national budget, according to PNG National Research Institute (NRI).
It recently released a paper titled “Covid-19 and the PNG Economy: Potential Impacts of the K5.7billion Economic Stimulus Package on the 2020 National Budget” put together by NRI director Osborne Sanida.
It noted that the K5.7 billion economic stimulus package had six components:

  • K2.5 billion (43.9 per cent of stimulus package) in domestic financing through the issuance of Covid-19 Treasury Bonds;
  • K1.5 billion (26.3 per cent) in “friendly foreign assistance” comprising K1.26 billion from the International Monetary Fund, K0.17 billion from Asian Development Bank, and K0.07 billion from World Bank;
  • K600 million (10.5 per cent) relief for businesses and households in the form of a 3-month loan repayment holiday;
  • K500 million (8.8 per cent) in superannuation measures, in the form of allowing members to access their savings during the economic downturn;
  • K600 million (10.5 per cent) extra budget support comprising K320 million for agriculture, business and households, and K280 million for health and security; and,
  • Supplementary Budget to find budget cuts/savings to address the increased deficit and financing options required.

“Four of the measures (treasury bond issuance, international financing, proposed supplementary budget and extra expenditure for health, security and the economic sectors) will have a direct impact on the budget, by affecting key budget variables,” Sanida said.
“All the six measures will affect the budget indirectly via increased consumer spending that could lead to increased tax revenue for the Government.
“Given the loans for deficit financing, the repayment burden will be here after the Covid-19 pandemic has gone.
“So it is important for the Government to manage the loans wisely so that the deficit and debt levels do not get out of control going forward and Government revenue is increased to address the growing debt burden,” Sanida said.