Mr Speaker, honourable members of Parliament, our people of Papua New Guinea and our friends in the global community. Her Majesty’s Opposition is of the firm view, that we must not only contribute to the debate but bring to the urgent attention of Members of this House, both the failures and misdirection of Treasurer Basil’s, Economic Statement of 26 June 2019.
Mr Speaker, we live in a world of such extraordinary contrasts. On the one hand, we have a new Prime Minister, the honourable James Marape, with his big vision for PNG. He has a big vision of “Take back PNG”, for making PNG the richest black Christian country, he has a big vision to rid this country from the scourge of corruption, he is the first PNG Prime Minister to adopt social media, to speak directly to his people, on a more personal level. On the other hand, as I will outline in this reply, we have a new Treasurer with a small, isi tumas and PNC captured vision. What a contrast – a new visionary Leader vs a captured, poorly thinking Treasurer, who is not taking the urgent actions needed.
Mr Speaker, in my 20 minutes, I will summarise the fiscal update. I will evaluate the Treasurer’s statement against the benchmark of the three KPI’s or Key Performance Indicators, that the Opposition had announced last week. I will then show how this statement has been captured, by previous dark forces lurking in PNG, and why this statement, is a disappointing disaster for the new Prime Minister and the people of PNG.
Summary of Fiscal Statement
Mr Speaker, let me summarise the key facts from the Treasurer’s Statement.
- First, he has admitted the fake revenue forecasts of the 2019 Budget. Specifically, total internal revenues are down by 19% from the K13.3 billion included in the 2019 Budget. Over a year, this is K2.53 billion in fake revenue. This is even more than I feared. PNC’s medium-term revenue plan is failing.
- Second, he has confirmed expenditures are out of control. Specifically, wage costs are shaping up to be nearly K1 billion higher than the K4.4 billion planned – so another billion Kina over-run, as we saw in 2018 when the final budget outcome was K5.2 billion. Interest costs are out of control because debt is out of control, and with debt interest costs running K142.7 million above budget in just the first five months, the total debt interest bill for 2019 will now move to nearly K2.3 billion.
- Third, because of the continuing incompetence, in handling wage and interest costs, we have the short-sighted policies of slashing development expenditure. Specifically, development expenditure by May 2019 was expected to total K2.1 billion but actual 2019 development expenditure has only been K728 million – so a cut of 65%! So the new Treasurer, is now introducing and presiding over, Fake Projects! Over a year, this cut will be some K3.2 billion. DSIP is one of the casualties of this budget mismanagement – we are half way through the year and should each have been paid K5 million but instead we have been paid only K1 million. So the new Treasurer, is now introducing and presiding over, Fake DSIP! Ol Brata Member, Lukaut! Operational expenditure out of control, development expenditure being slashed.
- Fourth, there is a financing crisis of a net additional K600 million and misunderstandings of the previous debt strategy, so the new Treasurer plans to go off grovelling to private banks and international commercial lenders for more expensive, risky, foreign loans. Three new loans are being considered – and this seems totally contradictory to what the Prime Minister is wanting.
Mr Speaker, Treasurer Basil got lost in the detail of his 26 pages of numbers, but he failed to summarise the key points. Based on current trends, K2.5 billion in fake revenue. K1.3 billion in operational over-expenditure. K3.2 billion in development budget cuts – and even then, the budget deficit is up K600 million. The clear message, is that PNG’s fiscal crisis continues to get worse and worse! All the pretty medium-term plans they have put out, are failing.
Mr Speaker, let me now compare this economic statement with what we should have expected against three key performance indicators (KPI’s).
1. Independent and Credible
KPI No.1, Was the economic update independent and credible? The Prime Minister and people of PNG had every reason to be cautious about this Statement, because the Ministers and economic team that produced the update, are the same people, who created the problem in the first place!
The only claim to independence was about a “forecasting exercise done independently by the Treasury”. Whilst respecting the professionalism of the Treasury staff, I know that the Treasury Department, reports to you as Treasury Minister and you decide, what is actually released. We also know, that the current Secretary of Treasury, was a political appointment by former Prime Minister O’Neill. We have had serious doubts about the numbers provided, in recent years, by the Treasurer, claiming they have come from an “independent” Treasury, as they consistently show things are better than the views of almost, all other independent analysts. Why was there no attempt to get some independent analysis of the real situation, covered by whistle blower assurances, to public servants willing to speak up and tell the truth!
Mr Speaker, the Treasurer’s statement repeats the same pattern of misleading, overly optimistic assumptions and deceitful stories. For example, when talking about PNG living standards, he argues GDP per capita had been growing by 2.7 per cent per year from 2012 to 2018. Well that is a very, very interesting set of dates for the new Treasurer to use. First, why did he choose to start at 2012? Why has he started by defending the time of the O’Neill regime? Very suspicious! Lurking in the background! More importantly, why did he try and use misleading information, on living standards in exactly the same way as the former Prime Minister? Average PNG living standards have actually declined by 10% over those six years. PNG’s average living standards have gone backwards by K500 for every person under the O’Neill regime. I explained that in Question Time last month – only the resource sector had been doing well. The new Treasurer, who should be working for the new Prime Minister, not the old Prime Minister, is using figures to defend the O’Neill regime, figures from the political appointee of the old Prime Minister. On KPI No.1-independence and credibility, the Opposition and dare I say, the majority in this House, issues a capital “F” for FAIL!
2. The Big Picture
Mr Speaker, KPI no.2, Does the economic update provide the big picture on development issues facing PNG? There is no attempt, to put the Statement, in the context of the development crisis facing PNG, after the six years of the O’Neill/Abel regime. There is no statement, confirming that formal employment levels have been going backwards and are now 50,000 less than in 2013 and 120,000 less than if the economy had done as well as under the previous government. No mention of the health crisis facing our people. There is no mention, whatsoever, of the education crisis, with many of our schools, repeatedly closing early. Why is this important? If the new Treasurer doesn’t understand, that there is an acute development crisis in PNG, arguably close to the worst in its history, then he will be tempted to blindly follow the same PNC policies pretending that they are largely working.
Mr Speaker, we are in a crisis. We need policies that are fit for dealing with a crisis. The Treasurer’s statement is such a go-slow, isi isi tumas, small vision statement. It is like a turtle, slowly walking up the beach with its eyes closed.
Mr Speaker, The Alternative Government had a Rescue Plan ready to start immediately – for want of a better title, the “Laguna Plan”. Instead, we have the “Clowns from Crown” non-action plan. Where is Treasurer Basil’s rapid response, to the crucial crises facing PNG? At least, former Treasurer Abel recognised, there was a need for urgency with a 100 day plan. Even with its failings. Treasurer Basil seems to have a 100 year plan! Not 100 days but a 100 years – such a slow, isi isi tumas torosel. A turtle with a narrow vision, so he does not understand the urgency of the development crisis, PNG is facing or the grand visions of his Prime Minister. On KPI No.2-taking a big picture, a capital “F” for FAIL!
3. Factual Detail
Mr Speaker, KPI No.3, Does the economic update, provide complete details on the economy, budget and debt? There are so many facts missing from this Statement. Treasurer Basil failed Prime Minister Marape’s first KPI to “undertake a reassessment of the 2019 Budget and deliver state of economy statistics to ensure our budget for the rest of 2019 and going forward is anchored on solid achievable numbers”
For example, one major omission is that he didn’t even have the debt figures ready! How large is debt? Everyone is looking forward to a debt update, the one which should have been included, in last Thursday’s statement. But if we even forgive him for more slow, isi isi tumas performance, he deliberately, repeated the former misleading PNC claims, that the debt to GDP ratio is only 31.4%. Everyone knows that the debt situation is so much worse.
Mr Speaker, there is still so much we don’t know. Are government contract arrears K1 billion or K3 billion? Are unpaid GST refunds zero or K2 billion? Is unfunded debt zero or K5 billion or even K10 billion? How big were the actual losses on the UBS/Oil Search fiasco? How much have we lost on the Nautilus/Solwara fiasco? Where are the controversial and much talked about funds owed to landowners in the PNG LNG gas project and other existing resource projects in PNG? On KPI No.3-honest and complete details, a capital “F” for FAIL!
Mr Speaker, the Treasurer’s Economic Update therefore, does not pass KPI NO.1-of independence, of credibility, KPI No.2-of taking a big picture, KPI No.3- of giving honest and complete details of the economy, 2019 budget and our country’s debt position.
PNC Blueprint will be an on-going disaster for PNG
Mr Speaker, there is this enormous mis-match facing PNG. We have a new, dynamic and visionary Prime Minister. In contrast, we have a new Treasurer who is doing it slow, who is covering up the poor economic performance of the O’Neill years, who’s entire set of fiscal actions are just repeats, almost identical repeats, of the former Treasurer. So what I see, is just a continuation of PNC policies. It is just more of the same.
Mr Speaker, there is an alternative. We need economic and fiscal policies, to match the vision of the new Prime Minister. Frankly, the current economic team, is not up to the task. From Opposition, without access to all the facts on how deep the economic hole, we cannot say exactly, how to get out of that hole. But we do know, that it will require a radically different set of policies, than PNC repeat policies from the Treasury. We know that you do not borrow more, simply to plough more debt into recurrent costs. We know that there can be good borrowings, but only if on the right terms and directed to specific activities, where the economic return is greater than the interest costs. The current Treasurer lacks even these basic understandings.
We have a new Prime Minister that wants PNG to live within its means, but we have a new Treasurer wanting to do more commercial borrowings, with the fees and charges applied by the large foreign banks and consultancy firms.
Mr Speaker, unfortunately for us, but even more so for our children, PNG is in an economic crisis. PNG is in a fiscal crisis. PNG is in a debt interest crisis. PNG is in a health crisis. PNG is in an education crisis. PNG has such tremendous potential, that we should not be in such crises.
We have a Prime Minister that understands this big picture and that urgent action is needed. In contrast, we have a slow, “PNC policies as usual” approach, set out in this Economic Statement by the new Treasurer. It fails all its KPIs. It fails a test of what is needed for this nation. It fails to understand, that the winners should not be the Department of Treasury and supporters of former PNC policies. Treasurer Basil’s Economic Update statement, fails the Prime Minister, fails the ruling coalition partners and fails the people of PNG.
Mr Speaker, in concluding, may I remind us all sitting in this House today, that the Prime Minister has a vision, “where not one child born into our country irrespective of colour, ethnicity, religion or politics is left behind”. Treasurer, Finance Minister and Planning Minister, how many children, will you leave behind?
Thankyou Mr Speaker.