More funds to come from extractive industry

 A LARGE portion of this year’s revenue forecast of K1.3 billion will come from the mining and petroleum taxes in addition the K0.5 billion in LNG dividends, an official says.

Bank of Papua New Guinea governor Loi Bakani said given the significant decline in oil and gas prices, the tax revenue target may not be achieved if some portions of the gas sales are not locked in forward contracts. 

He encouraged the Government to closely monitor developments in the international prices of these important export commodities and be prepared to make prompt adjustments to its planned expenditures. 

“Those non-priority recurrent expenditures should be deferred or cut, while priority areas of education, health, infrastructure, law and order and agriculture should continue to be supported.  

An increase in interest payments of 50.4 per cent to K1.1 billion this year from K751.0 million in the 2014 revised budget was a significant increase in interest cost to the Government. 

Bakani maintained that real interest rates were positive and there was no need for further increase in interest rates on Government securities. 

But in a market with few players and limits being placed on exposures to Government debts, he said that may be a constrain on the Government’s ability to raise domestic financing, which could exert upward pressure on domestic interest rates and cost to the Government.