2017 Budget Predicts Weakening Kina, Rise in Inflation

The Papua New Guinea Government has tried to present an optimistic outlook in the 2017 budget as it contends with uncertain global economic conditions, low commodity prices, depressed oil prices and the weakening of the Kina against the US and Australian Dollars.

While the IMF has predicted nominal world economic growth of 3.1 percent, the impact of that growth will not be felt until much later.

The uncertainty presented in the global economy is reflected in many areas domestically.

“We are hopeful that the 2017 budget may provide a watershed period that points to significant improvement in the global economy as well as in PNG,” said Treasurer, Patrick Pruaitch.

Domestically, Papua New Guineans can expect increases in the prices of food, transportation, building materials and possibly utilities as the government announced a projected increase in inflation from 5.7 to 6.6 percent.

Importers and overseas travellers are also expected to be hit hard with the Kina, expected to weaken by 9.2 percent against the US dollar and 13.4 percent against the Australian dollar.

Health, education, provinces provincial allocations and infrastructure remain the biggest components of spending, however, spending in those areas remain below the amount spent on debt repayment.

Total spending on health in 2017 will be K1.2 billion. This compared to the 2016 supplementary budget, is a 20 percent cut.

In Education, K1.16 has been allocated, a reduction of 7.4 percent from the supplementary budget. Despite ongoing concerns over the non payment of the Tuition Fee Free funds, the Government says it is maintaining the K602 million allocation.

Provincial and District spending remains a key priority of area. However, the Treasury Secretary, Dairy Vele, has pointed out, cash flow will continue to remain a problem for the government.

Vele has also highlighted in his very optimistic outlook, that the government is reducing spending on non essential areas and wastage, whilst demanding dividends payments from state owned enterprises.

“We cannot have spending on new cars, vehicle hires, overseas travel and lavish meetings,” he said.

Debt servicing remains a key focus of government with expected spending expected at K1.3 billion.

Two biggest expenditure items, as expected, are APEC and the elections.

The government is spending K250 million on the administration and security of the meeting which will see world leaders come to Port Moresby.

In response to the ongoing debate on social media and in Parliament, Treasurer, Patrick Pruaitch, defended the expenditure saying the government was focused on the potential of new investment and relationships.

“We are not looking at the costs,” he said. “We are looking at the 10,000 investors who will be coming to Papua New Guinea.”

Scott Waide

is the Lae Bureau Chief and began his career with EMTV in 1997 as a News and Sports Reporter and Anchor and has been a media professional for over 19 years. Having previously worked as a Producer and Researcher for the Australian Broadcasting Corporation's Port Moresby Bureau, he is a recipient of multiple awards including the Asia Pacific Broadcasting Union Prize in 2005 in Iran for best news feature, the Pacific Island News Association Award and the Divine Word University Media Freedom Award.

Scott Waide

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