By Sarah Byrne
PAPUA NEW GUINEA delivered its biggest budget yet in November last year, with industry commentators highlighting the need for PNG to focus on developing small to medium size businesses and traditional drivers of the economy as LNG construction slows down.
Total revenue in 2015 is projected to be K13,927.3 million, which is K1,252.5 million higher than the 2014 budget estimate of K12,674.8 million, with total expenditure and net lending projected to be K16,199.1 million.
A budget deficit of K2,271.9 million is expected based on the expected expenditure versus projected revenue.
In a budget commentary by PwC Australia, the professional services firm reported a rebound in LNG construction activity for 2015 with a flow on effect to non-mining sectors, including finance, real estate and business services.
Total non-mining gross domestic product is reportedly expected to grow at a rate of 4 per cent in 2015, rebounding from the slower 1.4% last year.
PwC Australia said over the medium term the PNG economy is expected to adjust to traditional drives of the economy in non-mining sectors, expected to set in after the economy absorbs peak levels of LNG production in 2016.
In a report by The National Research Institute, senior research fellow Dr Osborne Ogis Sanida said low funding in the budget for the economic sector is concerning from an economic growth and employment perspective.
Dr Sanida said it was important for the government to focus on broad-based economic growth to ensure more people are given opportunities to engage in the production of goods and services, resulting in more people engaged in paid employment.
Referring to the need for broad-based economic growth, Dr Sanida said “The government’s focus on small-to-medium enterprise (SME) development is a step in the right direction.”
“It is hoped that the SME policy is successfully implemented by all stakeholders in order to create opportunities for job and income creation,” he said.
Visiting fellow at the Australian National University and former executive at the Australian treasury, Paul Flanagan told PNG Resources that the PNG government should work out a plan to repay debt at a reasonable interest level.
“One of the problems with the 2015 budget is the largest area of increase in expenditure is interest costs on debt and this is driven by a significant increase in public debt,” Mr Flanagan said.
Despite PNG LNG being a great economic driver for the country, Mr Flanagan said the drop in the price of oil would impact PNG revenue.
Dr Sanida agreed that public debt was a concern and said with taxes being a main source of revenue, it is important for the PNG government to promote broad-based economic growth through SME development.
The development of business can be promoted by unlocking more customary land for development via the Voluntary Customary Land Registration System, benefiting landowners and entrepreneurs who lease land for development purposes, Dr Sanida explained.