“PNG’s mid-year economic and budget update was released on 31 July. This was a chance for Deputy Prime Minister and Treasurer Charles Abel to start being more transparent about what is really going on with this country’s budget. This could have been the vital first step for rebuilding confidence. PNG has lost much of its economic credibility as reflected by the unprecedented downgrades of PNG by international credit ratings agencies in March and the on-going delays in World Bank financing and the sovereign bond” said the Shadow Treasurer, Mr Ian Ling-Stuckey.
“One could drive a mining truck through the holes in the credibility of the MYEFO. The government is claiming that its government’s deficit will be exactly, exactly to the decimal point, as claimed at the time of the 2018 budget of K1,987.2 million. This is simply too good to be true – forecasts simply are not that accurate”.
“There has been much discussion in recent weeks about the extraordinary level of loan repayments having to be made by this government following the worst record of deficit budgets in this nation’s history. The MYEFO is frank enough to reveal that even domestic debt borrowing in the first six months of 2018 totalled K6,367.1 million. This was 61.3% of the total 2018 appropriation of K10,388.5 million – so the government has had to borrow one billion Kina more than expected, even by 30 June 2018. As Treasurer Abel has acknowledged, there is a serious issue is the structure of PNG’s debt portfolio with too much short-term debt. Of course, the real issue is all of the hidden debt the government has in State-Owned Enterprises. When will the Treasurer release the audited reports of these SOEs as promised in his 100 Day Plan?” asked the Shadow Treasurer.
“There is also a serious issue with PNG’s exploding level of interest costs. One part of MYEFO says they are in line with expectations at K1,864.7m, noting that this is a major increase from even 2017 updated figures of K1,633.9m (Table 11). However, some tables in the MYEFO indicate interest expenses have increased by more than a further K200m to reach K2,092.1 million in a 2018 “Revised Budget” column of Table 19 on p60 – also indicating even “Warrant Authority” has been given for K1,928.2m. Given the sensitivity about the accuracy of interest payments in PNG, this is a surprising inconsistency” said Mr Ling-Stuckey.
“And why could these interest costs keep increasing? Possibly it is because the government has failed to provide the needed counterpart funding to get access to concessional loans. Expenditure on concessional loans is only at 27.4% of appropriations. This is the cheap source of funding for PNG’s needs, and expenditure on such loans should be at 50% half-way through the year.
“Overall, the Treasurer has failed to provide the transparency to rebuild confidence in PNG’s budget credibility. This is a failed MYEFO. It is a missed opportunity to help build faith in the honesty of the PNG government. This is a particular shame in the lead-up to the APEC Summit when countries around the world will be looking for more credibility” stated the Shadow Treasurer.
Shadow Minister for Treasury & Finance
5 August 2018