IMF urges caution on govt spending

 THE International Monetary Fund (IMF) said the government should be cautious when spending on free health, education, law and order improvement and infrastructure development.

An IMF team led by Yongzheng Yang was in the country from Aug 19-Sept 3 for the Article IV Consultation and provided some recommendations based on the government’s policies. 

The team met with Minister for Treasury Don Polye, Bank of Papua New Guinea (BPNG) Governor Loi Bakani, members of Parliament and other senior public officials.

They also had talks with the representatives from the private sector, think-tanks and development partners with staff from the Asian Development Bank and the World Bank who joined the mission. 

Yang said the mission welcomed the government’s increased funding allocation this year to law enforcement and the legal system, infrastructure, health and education.

He lauded the government’s commitment to ensuring that national debt remained within the target of 30% of gross domestic product (GDP) over the medium term. 

However, Yang said the quality of spending remained a concern in some projects, particularly at local levels. 

“In these cases, resources should be saved until development projects could be implemented effectively. 

“In light of capacity constraints, the mission recommends a moderate fiscal deficit of about 4% of GDP for next year.

Yang said the budget should focus on improvements in spending quality. 

The Organic Law on Sovereign Wealth Fund Management, which was passed by parliament in February last year, followed sound international guidelines, and the Sovereign Wealth Fund now needs to be adequately resourced and operated,” Yang said

He said PNG’s economic growth was expected to be around 5.5% this year, which would pick up speed through next year  and 2015, once production at a new LNG plant reached full capacity.