Fiscal changes fitting

 By SHIRLEY MAULUDU

The ANZ Bank says the fiscal changes announced by Government on Tuesday are appropriate. 

South Asia, ASEAN and Pacific chief economist Glenn Maguire said given that the country is a low income developing economy, and the drought situation as well: “I think what we have seen is actually a very well appropriate reduction in fiscal policy.”

The Government had announced its plans to cut public expenditure by K1.4 billion, and increase revenue by K1.1 billion as a measure to offset the sharp fall in tax revenue this year.

Treasurer Patrick Pruaitch said the big drop in Government revenue was largely caused by the reductions in export commodity prices.

The Treasury Department’s mid-year economic and fiscal outlook released in July projected that Government revenues would drop by K2.6 billion, and take the budget deficit to an unprecedented level of K4.8billion or 9.4 per cent of gross domestic product (GDP).  

Maguire said though many of the PNG economy observers had been calling for large cuts in outlays, he thought otherwise. 

“If Papua New Guinea was a developed income economy, I would be a bit more critical of the fiscal position but given the country being a low income developing economy, given the drought, I think that what we have seen is actually a very well appropriated reduction in fiscal policy,” he said. 

“It is important that the fiscal policy which is more aimed at the domestic sectors of the economy is still continuing to provide some support at this stage.”