Overpowering debt level

The National Letters

THE Government has been ramping up spending by more than it generates in revenue since 2012, following the global financial crisis in 2007, the end of PNG LNG project construction in 2014, and a severe fall in international commodity prices in 2014.
The increase in spending is intended to support business activities, employment and growth as measures by the gross domestic product (GDP) published by the National Statistical Office of Papua New Guinea (PNG).
The increase in Government spending has not resulted in an improvement in the quality of physical infrastructure (such as roads, bridges, and wharves), health and education, quality of life and employment opportunities for Papua New Guineans.
Instead, employment has been falling through the years, while the Government has been struggling to raise revenue to fund its priority expenditures.
This is not a surprise, and is explained by the following:

  • The Government has been spending more money on maintaining current expenditures for consumption, while reducing spending on public investment;
  • Public investment is in areas that do not generate Government revenue, such as the road and sports infrastructure development in Port Moresby.
  • Free education and health policies are draining Government revenues, with poor-quality outcomes; and
  • The Government is granting favourable tax and other concession to the developers of mineral and hydrocarbon projects in PNG. These projects have very limited spill-over effects to the rest of the economy, and yet the

Government continues to give preferential concessions to these projects. As a result the Government is losing significant tax revenues, which undermines the need to collect sufficient revenues to fund the national budget.
These reasons explain why the Government is unable to raise sufficient domestic revenues and is borrowing more money to fund the national budget every year.
As a result, the national Government’s debt has more than doubled over the past five years.
The significant growth of the nation’s overall public debt means PNG has effectively mortgaged its future tax revenues to servicing this debt, at the expense of national development and growth.
The current and future generation of PNG will bear the burden of servicing this debt in the years ahead.

Concerned taxpayer,
POM