NEW RESEARCH HIGHLIGHTS ECONOMIC DAMAGE DONE BY O’NEILL REGIME: GRASSROOTS SUFFER WHILE O’STEAL AND CRONIES GET RICHER AND RICHER
Expert independent analysis continues to expose Prime Minister Peter O’Neill as the worst economic manager in Papua New Guinea’s history.
New research published by DevPolicy Blog at the Australian National University shows that PNG is now suffering from a revenue crisis, in addition to its well-known government cash-flow and foreign exchange crises.
The research shows that Government revenue has fallen back to the 2006 level of about K10 billion a year in real terms.
The Prime Minister’s economic and financial recklessness has caused a K2.5 billion fall in revenue in only two years!
This, combined with population growth over the 10 years of about 25 percent, explains why PNG people are suffering under Mr O’Neill like never before.
Citizens’ standard of living and quality of life have been going backwards under the O’Neill Regime.
The collapse in revenue since the peak of K12.5 billion in 2014 is behind the continued decline in service delivery in critical areas such as health, education and transport.
It is a major reason behind the need to bring down the 2016 mini-Budget – which itself will cause more cuts to essential services and bring more suffering to the people.
It is a contributing factor to higher prices and increased unemployment, which in turn feeds into many of the social ills currently being experienced such as the rising crime rate.
Mr O’Neill’s destruction of the national revenue base adds to his international reputation for corruption, waste and mismanagement in all areas of national affairs:
• Internationally recognized as the most corrupt leader in the Pacific and the most corrupt Prime Minister in PNG history – worse than previous record-holders Paias Wingti and Michael Somare
• The most useless manager of the economy and Government finances in PNG history – even worse than his conman predecessor Bill Skate
• The worst manager of foreign relations in PNG history – presiding over a neo-colonialist invasion of PNG by his conman cronies from China, Malaysia and Indonesia, fighting with PNG’s friends in Australia and Fiji, aiding and abetting the Indonesian genocide in West Papua by supporting them in the MSG
Mr O’Neill’s economic and financial management is so bad that every single one of his Budgets has brought the nation ever closer to bankruptcy and ruin.
A mini-Budget was required in 2015 soon after that year’s Budget was shown to be another disaster.
Now a 2016 mini-Budget has had to be brought down because the 2016 Budget is a complete failure.
The mini-Budget confirms Mr O’Neill’s mismanagement of the economy.
He was boasting at the start of this year that GDP was growing at 9.2%. The mini-Budget shows he is a liar – GDP is growing at 2.2% a year.
The value of the kina continues to fall – the mini-Budget predicts it to weaken 9.1 per cent against the US dollar and 12.6 percent against the Australian dollar.
Inflation – the price of goods and services – will rise from 5.7 percent to 6.6 percent.
The mini-Budget does nothing to deal with Papua New Guinea’s underlying economic and financial problems, including the revenue collapse rather than dealing with internal policy and implementation failures.
It blames commodity price falls, but in fact the DevPolicy research shows that the collapse in revenue has been building for many years and has become institutionalized since Mr O’Neill came to power.
It blames Brexit – Britain’s vote to leave the European Union. The effects of Brexit on Papua New Guinea are exactly nil.
It blames “slow but steady economic recovery” around the world. Why is the rest of the world experiencing economic recovery and Papua New Guinea is not?
The answer is simple: the mini-Budget, like everything the Prime Minister says, is a tissue of lies.
The mini-Budget makes spending reductions of almost K1 billion, which are expected to come from cuts to travel, hotel accommodation, training, conferences, car hire and hiring of new foreign consultants.
This is just wishful thinking. Knowing the greed and selfishness of the Prime Minister and his colleagues, spending on the above is likely to continue as before.
Mr O’Neill’s mini-Budget also calls for revenue-raising measures of almost K1 billion.
This money is to come from dividends from SOEs (which are already broke and not fulfilling their function of providing essential services) and from the sale of the 4.27 percent equity in PNG LNG to landowners (a rip-off if ever there was one).
Mr O’Neill is also freezing Public Service hiring, and he plans to amalgamate and abolish departments, which means hundreds more public servants will lose their jobs.
All in all, the 2016 Budget and Mini-Budget are a disaster for the standard of living of all Papua New Guineans.
Once again, as in 2015, grassroots Papua New Guineans are the biggest losers, victims of savage cuts in spending on essential services such as education, health and transport.
The mini-Budget does nothing to avert even bigger spending cuts planned by Mr O’Neill for the 2017 Budget.
Education spending in the 2016 Budget was cut by 20% from K1.55 billion to K1.23 billion, and a similar cut is planned in the 217 Budget.
Transport spending – roads, bridges, wharves, airstrips - was cut by 25% from K1.58 billion to K1.11 billion. O’Neill plans an even bigger cut of 31% in the 2017 Budget.
Law and justice was cut by 6% from K1.24 billion to K1.11 billion. An even bigger cut of 19% is planned in the 2017 Budget.
Health was cut by 1% from 1.49 billion to K1.47 billion. Mr O’Neill is planning a huge cut of 40% in health spending in the 2017 Budget.
Debt repayments are now higher than spending in each of the annual health, education and transport budgets.
Mr O’Neill’s reckless and illegal overseas borrowings, notably the UBS debt of K3 billion, have caused debt repayment to rise a massive 23% from K1.13 billion in 2015 to K1.4 billion in 2016.
Repayments are even higher now following the K1.5 billion Credit Suisse loan earlier this year, and will increase yet again in 2017.
Total national debt is now well over 50% of GDP, and in clear breach of the 30% level set by the Fiscal Responsibility Act.
It is almost certain that some form of revenue reform will have to be implemented in 2017 – in other words higher taxes.
One obvious option is to accept the Tax Reform Commission’s recommendation of a 50% increase in the GST, which is a regressive tax and will have the greatest impact on ordinary Papua New Guinea while rich people like Mr O’Neill and his cronies will hardly notice the increase.
Another option is to increase non-mining and resources taxes. Both Mr O’Neill and his predecessor Sir Michael Somare have granted generous tax holidays and other concessions to their cronies in the resources sector.
The DevPolicy Blog research shows that non-mining and resources tax revenue has fallen from K3.3 billion in 2006 to just K200 million this year.
Mining and petroleum tax revenue as a percentage of the value of mining and petroleum output was approximately 42% in 2007. Today it is less than 1% of sector output.
While grassroots Papua New Guineans suffer under Mr O’Neill’s spending cuts and unfair tax burden, his rich big business cronies and supporters in the resources sector and the construction industry get favorable treatment.
A third option is to increase revenue by stimulating the economy. The O’Neill Regime can do this by devaluing the kina, but this will again hit poor people the hardest by increasing the local price of imported goods such as food, footwear and clothing, medicine and other essentials.
The 2017 Budget, no matter which option or options the Prime Minister adopts, is going to hit ordinary Papua New Guineans hard.
But it will probably not be enough. A properly structured, well-financed economic reform program is a critical necessity, with the cooperation of Papua New Guinea’s friendly neighbors and multi-lateral agencies.
All Papua New Guineans can look forward to is more economic and financial pain.
And it’s all Peter O’Neill’s fault.
Read the DevPolicy Blog research report here: http://devpolicy.org/png-real-revenue-back-to-2006-levels-20160822/
