PNG’s economic growth performance has fallen, Pruaitch says

Economic growth is strengthening around the world while PNG’s performance has toppled from being among the best performers to rank among the Asia-Pacific’s worst performers, according to Opposition leader Patrick Pruaitch, pictured.
In a statement, Pruaitch said mismanagement of the economy in the past six years contributed to dismal outcomes with the PNG’s gross domestic product this year forecast to grow by 2.4 per cent while population growth is 3.1 per cent.
In its latest World Economic Outlook published last month, the International Monetary Fund said: “Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms last year, the broadest synchronised global growth upsurge since 2010.”
With PNG anticipating sub-3 per cent annual growth and declining per capita incomes , the IMF said other emerging and developing countries in Asia would grow by around 6.5 per cent in 2018 and 2019, in line with their 2017 growth.
The fall in mineral prices in 2012 and crude oil and LNG prices two years later contributed to difficult economic conditions, but the IMF says the cyclical upswing that began in mid-2016 is benefitting countries around the world.
“Here in PNG, the global recovery is overshadowed by reckless Government borrowing, with debt servicing now the fastest growing component in the PNG Budget,” he said.
“By the end of this year PNG would have suffered more than three years of low growth, declining job opportunities and falling incomes and living standards. Gross mismanagement of the economy by the Government is contributing significantly to PNG’s gloomy outlook.
“The Government has not learnt any lessons from their failures in the past five years and have persisted on the same course of extraordinary levels of borrowing and debt that will remain a heavy burden on the next generation of Papua New Guineans.
“The fastest growing segment of the PNG budget is servicing of government debt, which this year will surpass K2 billion for the first time. The resulting cash flow problems are the main reason funds for tuition free education are released late or not at all, hospitals run out of essential medicines and public servants threaten to go on strike.
“Much of the K15 billion borrowed over the past five years has been squandered. Instead of generating positive impacts, growth has effectively stalled and made debt repayment burdensome.”
The O’Neill Government, which raised K15 billion in total debts during its first five years in office, has now agreed to borrow an additional K14 billion through a memorandum of understand, with just one company from China with the detailed terms shrouded in secrecy.
“I predict the 2018 interest component alone, to service the Government’s K25.8 billion debt, will surpass K2 billion for the first time to be almost double the size of the shrinking education budget or its law and order budget and some K500 million more than the health budget.”
Pruaitch said the Government made a big deal about wanting to stimulate the economy this year through its K4.6 billion capital investment budget but these initiatives will fail due to cash flow problems and an inability to focus on key deliverables.
In its Article IV report on PNG in 2014, the IMF noted that the O’Neill Government’s 2014 budget had allocated K1.7 billion for roads, which was three times the 2011 allocation and 10 times the 2003 road budget.
The IMF said the 2014 emphasis on new capital projects and lower priority for operations and maintenance resulted in recurrent spending by the Department of Works being slashed from 33 per cent in 2011 to 11 per cent in 2014, which “jeopardizes the sustainability of investment by limiting routine maintenance.”
Pruaitch said: “The result of this high-level incompetence is visible to people throughout this nation.
“The major highways in East New Britain and the Islands all the way to the Highlands and the Sepik region were in decent shape in 2010-11. They had deteriorated into a patchwork of potholes when politicians last year campaigned around the country.”
He said evidence of economic mismanagement is captured almost daily by the media.
The Government’s second most important revenue collecting agency, Customs, was recently locked out of its premises for failure to pay rent, following what has happened to other important government departments.
Promises to increase the pay of teachers from last year has not been budgeted for and thousands of new graduate teachers last year did not receive any pay, a symptom of the industrial problems facing many government workers.
It has taken a court order for the Government to pay part of its outstanding superannuation debts to Nambawan Super.
In a recent commentary on PNG, the World Bank said: “Evidence indicates that delays in government payments reduce private sector profitability, increase the likelihood of bankruptcies, and slow economic growth.
“My prediction is that due to understatement of 2017 and 2018 public debt levels, the 2018 figure for debt servicing is certain to surpass K2 billion for the first time, truly a sad day for people of this country.”