by Serah Aupong – EM TV News, Port Moresby
A supplementary budget is expected to be handed down in the next parliament sitting.
Bank of PNG Governor, Loi Bakani, said this needs to happen to ensure stability within the PNG economy.
Speaking during a press conference today, Mr Bakani says the Mid-Year Economic and Fiscal Outlook report has highlighted several economic developments that requires the government to make immediate adjustments.
“This is the reality, we have to adjust to the real shocks we are facing now in the economy,” Mr Bakani said of the low commodity prices and low revenue earning that the s sector is facing.
Mr Bakani echoed the likely impacts the low commodity prices will have on the economy and the national governments revenue, “It will impact on the tax revenue that the government is expecting from the s sector. It will also affect the inflows of foreign exchange, again this is another effect that we will see in the foreign exchange market where there is ongoing shortage of foreign exchange coming in and with that it will also affect exchange rates and the level of reserve we have.”
He says while PNG’s growth rate will decline from the projected rate of 15.5%, he says contrary to gloomy commentaries, PNG’s economy is still strong.
“We still have a 9 to 11% growth in the economy,” which Bakani says is comparable to other emerging economies.
But he says the reality is that PNG does not have the revenue to maintain the spending that the government originally planned for.
“They have to critically look at the budget for this year and cut or delay or defer some of those non priority expenditure areas that are on this year’s budget.”
Mr Bakani says the government’s expenditure and revenue are below the budgeted level which has resulted in a deficit of K0.94 billion. He said adjustments that are made to the national budget must ensure that the deficit should not be greater than K2.3 billion.
“The critical point is that if the government maintains 4.4% of the GDP deficit this year as per the original budget, it will set a good foundation for 2016, if it does more and brings deficit down even lower, it will place government in a better position.”
Mr Bakani supported the Prime Minister’s stance that priority areas of health, education and law and order will be protected against these adjustments.