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Port Moresby
March 8, 2021
Business News

State of the Papua New Guinea Economy

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The Papua New Guinea government is being heavily criticised over its handling of the economy amidst falling oil prices and the temporary closure of the Ok Tedi mine – one of the biggest revenue earner for the country.

While on one side, international analysts continue to predict a Greece-like economy meltdown in which public debt spirals out of control and deficits reach unprecedented levels, senior government ministers have come out stating that the crisis is manageable.

Figures stated in the Mid Year Economic and Fiscal Outlook already show an alarming downward trend, according to Paul Flanagan, a visiting fellow at the Development Policy Centre.

“Public debt levels are expected to skyrocket from the earlier 27.8% of GDP to 41.3%. The estimated budget deficit for 2015 blows out from an already high budgeted 4.4% of GDP to 9.4%.”

The government’s attitude towards budgetary cuts has not helped stem negative public opinion. Government spending has remained high as oil and mineral prices plummeted.

It has had to put up with strong views that the budget should not have been framed against future revenue projections.

On Thursday, Planning Minister, Charles Abel, said there would be budgetary cuts made to various areas.

But having said that, the government has remained tight-lipped about where those cuts will happen. 

Late Friday, Treasurer Patrick Pruaitch, reinforced the government stand indicating an introduction of a supplementary budget and further stating priority areas would remain untouched.

“Cognizant of the fiscal realities, it has and will continue to review its position including handing down an Appropriations Reduction Bill in 2015.

“The priority areas of education, health, law and order and the Provincial and District Support Grants however, will not be revisited.”

Critics, meanwhile, say now is the time to cut back on wastages in state-owned enterprises and that adjustments need to be made to the slow, cumbersome public service that consumes a lot in recurrent expenditure.

Prime Minister, Peter O’Neill, is expected to make an official statement on the state of the economy in the next three days to outline the government strategy.

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