The update on the 2018 Budget released on 31 July does not deal with the major questions I raised about the credibility of the government’s budget policy in my budget reply speech in November last year. At that time, I indicated the 2018 Budget was based on fake revenues of some K2 billion, which led to false hopes about increased infrastructure spending beyond APEC. Looking at this most recent update, I stand by my concerns” stated the Shadow Treasurer, Mr Ling-Stuckey.

“The big issue in the 2018 Budget and this update is the level of fake revenue predictions. The government denies this strongly but it needed to provide more evidence to restore its credibility. One clear example is the 2018 Budget assumption that an extraordinary K800m of “Other Revenue” will be collected from just the National Fisheries Agency (K400m in dividends this year and K400m in sweep revenue collections from last year but included in the 2018 budget). This is over 5% of the entire revenue base. However, not a single word is provided on how these payments are going. We know from press reports that K400m was not paid in 2017 as predicted. How much more of a shortfall will there be in 2018?

“The GST revenue collection figures also remain too high to be credible. The simple game to keep these GST revenues looking high is to reduce the level of legally required GST refunds. This just hurts the cash flows of genuine PNG businesses already suffering from foreign exchange restrictions and low growth. For anyone to believe GST revenues are going up so quickly, the IRC must release complete information on the total level of collections and the total level of refunds over recent years including 2018 – not just “net” collections. There are hundreds of millions in fake revenues in this area alone.

“The Treasurer stated on 18 July that there would be up to K1,500m in revenue windfalls from the increase in commodity prices. I wanted to see the detail before questioning such an improbable figure. Fortunately, the Treasurer has predicted a much more modest increase of K142m. Even this,relies on good production figures in 2017. The impact of the earthquake also seems to be understated and private sector companies have not been as optimistic as the Treasurer in their discussions with shareholders on the likely impact of the earthquake.

“The government is constraining expenditure, but it is doing so in the wrong ways. Specifically, the government is spending slightly faster than expected on operational expenses such as public servants (just over 50% by 30 June) but only half the expected rate on key capital works programs (just 21.4% of expected spending levels by 30 June). This means the government is sacrificing short-term expenditure targets at the cost of longer-term growth. There is a need for a more sensible balance with the treasurers cashflow management, and the government is getting the balance wrong” stated the Shadow Treasurer.

“Some areas of expenditure also need more explanation. The MYEFO Overview indicates the largest item of the K78.6m transfer between the operational and capital budgets is “District Support Grant program to specific 22 Districts in the Country totalling K55.0 million” p6. However, there is no further information made about this transfer, or how 22 Districts were chosen out of the 89 Districts in the country. Will these extra funds be just to Districts that commit with the government at the vote of no confidence early next year or are they earmarked to entice and gris NA and other opposition members to jump ship as well?” asked Mr Ling-Stuckey.

“Payments from the Secretary’s Advance (Table 20 p60) also raise some serious questions about why K2.5 million was made “to cover services to Norton Rose Twivey”. Why do we all just condemn and pick on Mr Paraka?”. More information should be provided about such payments, as well as a massive K8.7 million in outstanding hire car bills! Who in their right mind hires and wastes nearly K9 million or is this another legalized bribe to besties? Asked Mr Ling-Stuckey.

“Overall, the MYEFO is a lost opportunity. It does nothing to refute the concerns about fake revenues. Indeed, it makes matters worse by projecting even further increases in GST collections. The MYEFO also indicates that the government is holding back expenditures in the wrong way. There are too many cuts on vital infrastructure projects, including major cuts in projects financed by concessional loans. The Treasurer should have done better in the lead-up to APEC” stated the Shadow Treasurer.


Hon.Ian Ling-Stuckey,CMG.MP
Shadow Minister for Treasury & Finance

 2 August 2018