Report: Budget deficit at K513m

THE mid-year Economic and Fiscal Outlook released today indicates that the 2012 budget has moved from a balanced budget to an expected deficit of K513.1 million, Treasurer Don Polye has announced.
Growth in the PNG economy had been revised upwards to be 11.0% last year and 9.9% this year.
Growth in non-mining GDP had also increased to very high levels of 13.1% last year and 10.4% this year.
These growth rates were some of the strongest of all nations in the world.
Inflation had been revised upwards to 8.0% this year.
Despite this strong growth performance, the fiscal position had deteriorated.
This was due to increased uncertainties in the international economy, a fall in most commodity prices, especially gold and copper, and the strong appreciation of the kina.
Altogether, revenue was now estimated to be K392.5 million lower than at budget time. Over-expenditures of K120.7 million, especially in provincial personnel emoluments, had been identified, Polye said.
“This is a responsible government that is willing to make the decisive decisions that are vital for protecting our economy and maintaining macroeconomic stability. So this government has a plan to address this deficit and bring us back to a balanced budget approach as outlined in 2012.”
The treasurer announced that the first step in this plan is to ensure all ministries do not overspend their appropriations.
“Particular action will be taken to address the expected over-spending in personal emoluments, especially in the provinces.
“Second, we will take immediate action to identify waste, duplication and lower priority expenditures.
“As mentioned by the prime minister, this will include looking for savings in the public service where there are inefficiencies.
“We need more expenditure out in the rural areas rather than public servants in Port Moresby.
“Third, administrative actions also will be taken to slow the rate of expenditure.
“For example, within the development budget, the rate of actual spending indicates that some agencies do not have the capability to spend all the 2012 funding effectively by the end of the year.
“We can still support such programmes in the 2013 budget but they should not feel forced to spend the funds just because we are approaching the end of the year.
“We will also look towards the IRC and Customs to see if further revenues can be raised through higher compliance efforts.
“We will also approach SOEs to see if further dividends can be paid in 2012.
“Together with the actions to reign in over-expenditure, these administrative actions will aim to bring the budget this year back to a balanced budget.
“Fourth, we will introduce a medium-term fiscal strategy that will focus on the key medium-term development plan enablers including education, health, infrastructure and law and order.
“We want to create a plan that provides a framework that strikes the balance between maintaining macroeconomic stability, supporting current economic growth; and meeting the significant development needs of our people over the next five years.”
A fifth strategy would be to release a 2013 budget strategy “that sets out how we
can meet the targets of the MTFS while also making a strong start in meeting our key priorities such as expanded tuition fee-free education”.
Finally, Polye said the government would take actions to make for better public financial management, including improvements in accountability and transparency.
Such changes would include a move towards multi-year budgeting, better information flows on the budget, stronger project screening and management processes and better systems of reporting on government finances.