Risky to borrow too much: NRI

The PNG economy compared to other Pacific Island countries is doing relatively well, though not as well as expected.

Because of the high growth rate previously, and with the commencement of the LNG project in 2014, expectations were high, leading to a number of hasty borrowing decisions by the Government.

National Research InstituteI’s Senior Research Fellow and Economic Policy program leader, Dr Francis Odhuno, said borrowing itself was not bad, as long as you know you’re going to repay your loan on time and the investments you make on the borrowed money, yield high returns. However, with unforseen shortages comes the temptation to borrow more.

“The problem is when those borrowings are not put to good use, then when it’s time to repay the loan, we will definitely feel the pinch.”

Making the assessment, Dr Odhuno says there is a danger in borrowing too much, especially when the country is blessed with an abundance of natural resources.

The first shipment of LNG left PNG in May 2014, since then over 200 shipments have left the country, however the highly anticipated big boom is still waiting to happen.

“We are shipping a lot of LNG gas but the returns are not as yet tangible, so people are asking about the revenue generated from the project, how come it’s not flowing as expected because the expectation was to have a big boom,” said Dr Odhuno.

He says with a shortage of revenue coming into the country, the government is forced to do a number of budget shifts, from one priority to another.

For example, the revelation by the Electoral Commissioner that K20 million of electoral funds were diverted for Tuition Fee Free education.

“Once we have shortage of revenue flowing into the country, then government revenue also decreases, so we have a little bit of budget tweaking to suit the current situation, instead of what we initially budgeted for,” Dr Odhuno said.

Meredith Kuusa