World Bank warns of ballooning budget deficit

The World Bank has warned that PNG’s expenditures will need to be curbed in a measured manner to avoid a ballooning budget deficit.

Economists said Papua New Guinea remained at a low risk of debt distress based on an assessment of public and publicly guaranteed external debt distress.

“The overall risk of debt distress remains heightened when considering the domestic public debt stock, off-budget public sector liabilities, and public enterprise debt.

“For the medium term, the government is developing a new budget strategy, which is expected to focus on returning the budget deficit to a downward trajectory to ensure that debt remains on a sustainable path.”

The country’s GDP growth is expected to average 3.5 percent, with growth in the mining and petroleum sectors contributing 0.1 percent and other sectors contributing 3.4 percent over the next five years.

The World Bank East Asia and Pacific Economic update October 2015 has stated that the growth momentum in the non-extractive sector is expected to be led by the construction, transport, and communication sectors, owing to the effects of significant public expenditure to prepare for the Asia-Pacific Economic Cooperation Summit in 2018.

“Notwithstanding the possible improvement in revenue collection with the implementation of the recommendations of the Tax Review Committee next year, domestic revenue generation is expected to remain constrained in the near term due to subdued commodity prices, coupled with revenue receipts from Papua New Guinea LNG only reaching their full potential after 2022.” 

Freddy Mou