Economist expects tight budget

By HELEN TARAWA
AN economist has forecast that the 2019 national budget will account for a “tight revenue” situation, with continued low tax receipts from the extractive sector.
Institute of National Affairs director Paul Barker told The National that there was, however, some signs of improved revenue this year.
“Hopefully this will continue next year if commodity price improvements are sustained and that we don’t have further global economic downturn or natural disasters,” Barker said. He said expenditure has been constrained in recent years by the shortage of revenue and major expenses such as the 2017 general election and the preparations to host the Asia-Pacific Economic Cooperation Leaders’ Summit. There was also the unbudgeted teachers’ pay adjustments.
“Government has been funding much of budget since 2012 from borrowing,” Barker said.
“Some borrowing is fine, especially during economic downturns, so long as it’s sustainable and used efficiently, and for priority investment in useful infrastructure and services.”
He said debt levels were still above 30 per cent of Gross Domestic Product, plus various other contingent liabilities, and the high debt servicing costs sidelining funding for priorities.
“The more recent borrowing, both local and international, is getting expensive (high interest rates including from the new Sovereign Bond) and some also carries foreign exchange risks,” he said.
“We have the priorities set out in the new Medium Term Development Plan (MTDP) 3. It’s really important we focus on priorities, and avoid scattering or wasting expenditure. PNG must avoid letting debt levels become unsustainable. We should be aiming to shift from debt to setting funding aside in the Sovereign Wealth Fund, to smooth out funding for the annual budget, as well as saving in due course for the future.”
Barker said restoring infrastructure and services at the district level was fundamental “but the district services improvement programme is severely undermined by weak capacity as well as top-down politicization, and in some cases corruption”.
“Over the next years, with existing and new projects coming on stream, with more beneficial project conditions, revenue will build up in 2019 and beyond.,” he said.