PNGBLOGS

by PAUL FLANAGAN   Papua New Guinea’s budget , released on 3 November and rushed through Parliament the same day, could have been so much better. Given the country’s record deficit levels, fiscal consolidation was vital even before the fall in international commodity prices. However, the proposed expenditure cuts do not match the government’s stated priorities of protecting health, education and infrastructure. They are also excessive – even more than those imposed on Greece as part of its structural adjustment program. Further, the budget suffers from factual errors relating to GDP and the external accounts, a lack of revenue effort, and inadequate transparency. This is the first of two posts providing a detailed analysis of the 2016 PNG Budget. GDP errors The budget makes a serious error in calculating PNG’s nominal GDP – and this affects all the key ratios and messaging from the budget. The nominal GDP budget estimates assume there has been no fall in LNG

STATEMENT by Rt Hon Mekere Morauta, KCMG November 4 2015 The Prime Minister of Papua New Guinea has once again singled me out for attack for expressing a view on current national issues. My assessment and analysis of the severe economic and financial difficulties facing the nation and the adjustments that need to be taken are entirely my own. My statements were made to promote public discussion and were published at my personal expense. Every citizen has a right to speak about national issues and challenges, and those rights should be respected by the Government.  The Prime Minister’s extraordinary attacks on me as an individual should be seen as part of a broader campaign of intimidation and attempts to shut down dissent, by force if necessary. Dissent is a sign of a healthy society. It is a sign of a robust democracy. The right to freedom of speech and the freedom to gather together publicly to express our views are precious public commodities. The Prime Minister claims t

by SIR MEKERE MORAUTA   Papua New Guinea needs to take urgent action to save itself from a looming economic and financial storm, former Prime Minister Sir Mekere Morauta said today. Sir Mekere, an economist and former head of Treasury, the Bank of Papua New Guinea and other institutions, said the nation cannot continue on its present course. “The Prime Minister has had plenty of warning from his own expert advisers in Treasury and from eminent foreign institutions and observers,” Sir Mekere said. “Good senior people in Treasury have been side-lined or sacked, or shipped out if a foreigner. Anyone who raises concerns suffers personal attack from the Prime Minister. “Or, as with the peaceful protestors who gathered at Unagi Oval on 26 October, being set upon and bashed up by the Police, no doubt on orders from above. “He has ignored all advice, and now the nation is suffering the consequences.” The latest warnings come from the international ratings agency Standard & Poor’s (S

by PAUL FLANAGAN Potential crisis – what does this mean? • 3 types of crisis observed in countries through time (talk will focus on first, and some comments on second) • Fiscal crisis (PNG – first and second 1990s crises) • Government runs out of money to pay its bills. • Potentially manifested by shortage of government cash, ‘out of the ordinary’ borrowings, printing money, much higher government security interest rates. • External crisis (PNG – first and second 1990s crises) • Running out of foreign currency to pay bills (either private or more particularly government) • Potentially manifested by various forms of exchange rate controls, tariffs and quotas, foreign currency borrowings. • Muddling down crisis (more African and South American examples) • Pattern of continuing poor decision making undermining sustainable growth. • Medium to long-term timeframe – a slow bubbling crisis that may extend over a decade. • Potentially manifested by pattern of poor eco

NATIONAL RESEARCH INSTITUTE An advertisement by NASFUND’s Board of Directors on 8th June on the issuance of Sovereign Community Infrastructure Treasury Bills (SCITB) relating to projects in Kokopo District, has raised more questions than answers. The National Research Institute which is mandated to carry out research, analyze policy issues and propose ideas affecting the development of PNG, maintains that the issuance of the ‘Kokopo Community Infrastructure Treasury Bill’ and the arrangements for the expenditure of these funds is illegal. This article serves to inform and create debate and discussion among the wider public for a better understanding of the implications of the SCITB. It also calls on responsible authorities to clarify and take appropriate action. Legality of Borrowing The National Parliament is the approving authority for any forms of borrowing and loans negotiated and taken out by the Executive Government. The Executive Government draws up a mo

by PAUL FLANAGAN   The PNG Government released its Mid-Year Economic and Fiscal Outlook ( MYEFO ) on Monday – the update on the 2015 budget. The estimated budget deficit for 2015 blows out from an already high budgeted 4.4% of GDP to 9.4%. This would be the highest in PNG’s history. Public debt levels are expected to skyrocket from the earlier estimate of 27.8% of GDP to 41.3%. In Australia, such a rapid change in the estimated fiscal position would go well beyond being termed “a budget crisis”. PNG’s official figures are much worse than at the time of PNG’s last economic crisis at the end of the 1990s (see graph below). PNG expenditure and revenues as a share of GDP – with updated figures from 2015 MYEFO Note: The gap between the lines indicates the size of the government deficit or surplus. Both lines exclude grants (aid). The drivers for the rapid deterioration in PNG’s fiscal situation are the fall in international commodity prices, a growth slow down as well