Using resource revenue ‘normal’

By PETER ESILA
TURNING to the resource revenue flow in repaying a country’s debt is normal for a developing country like Papua New Guinea, says an academic.
Papua New Guinea currently has a debt level of K37 billion, according to Treasurer Ian Ling-Stuckey.
Dr Marcel Schroder, assistant professor at the Lebanese American University and a visiting lecturer at the University of Papua New Guinea, said countries usually turn to their resource projects.
“As usual, when it comes to economic issues, it depends,” Dr Schroder, who is also a visiting fellow at the Development Policy Centre, Australia National University, and an Asian Development Bank consultant. For a developing country, dealing with high interest rate payments on a high debt level, it is a good idea if flows from resource projects are put to good use by repaying debt.”
He said Mongolia in East Asia was such an example.
Schroder said some resource revenue should also be spent on domestic investment projects.
“As for Papua New Guinea, where debt levels have been increasing but are still moderate, my view is that a significant proportion of the resource revenue should also be spent on domestic investment projects as they tend to have high returns.
“While doing so the Government needs to keep in mind the absorptive capacity of the PNG economy,
“If all the funds go to repaying the debt it means missing out on important high return investment and development projects.”
The government has recently been kept busy with its state negotiating team trying to get the best deal from just about every project lined up on stream. However, Dr Schroder said PNG was a developing country which meant funds for crucial spending such as infrastructure, health and education were needed today rather than tomorrow.
He said according to their studies on negotiating with multi-national companies, it was better to leave resources on the ground for the future if deals were not negotiated well.