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Wednesday 23 Aug 2017 | 07:25 | SYDNEY
Wednesday 23 Aug 2017 | 07:25 | SYDNEY

PNG budget an impressive sight

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19 November 2009 15:02

The PNG Government handed down its 2010 budget this week. Treasurer Patrick Pruaitch has predicted record high growth of 8.5% per annum, almost double the actual growth of 4.5% in 2009. The PNG economy recorded a major success story this year in continuing to grow at a robust rate and in surviving the global economic crisis relatively intact, despite its high dependence on commodity exports.

The budget is a conservative document but highly dependent on finalising the much anticipated LNG deal with Exxon Mobil next month. Although the first LNG exports from this project will not commence until 2013, the Government has estimated the preparatory and construction phases will contribute about 3 percentage points to GDP growth next year.

Pruaitch warns of an 'exceptionally large current account deficit' in 2010, caused by increases in imports required for the construction phase of the LNG project. Inflation is due to rise to 9.5%, making the already increasing costs of living in PNG more difficult to bear. The Treasurer admits that his Government's accelerated drawdown of trust funds and high spending presents a risk to the economy and the budget.

Domestic funding of the development budget has again increased, with funds now totalling about A$1.4 billion. The Government has again focused on transforming the rural economy. About A$92 million is devoted to funding national and rural road infrastructure, vital if the rural economy is to have a chance of genuine growth.

Increases to the District Services Improvement Program appear sensible on paper but capacity weaknesses at district level have constrained implementation of this program. The 85% of PNG's population living in rural areas complain that there is little to show for the Government's investment in district services – particularly in health and education. The Treasurer admitted that overcoming obstacles to improve service delivery at the district level continues to be a 'major challenge.'

PNG's anticipated economic growth is certainly impressive for a country that was in economic decline from 1995 to 2002. The 2010 budget is credible and balanced. But the Somare Government can only really claim success if it addresses extreme poverty and the critical needs of PNG's rural population. Improving PNG's extremely serious deficiencies in human development outcomes requires a much more concerted effort than this budget reflects.

Photo by Flickr user tunachilli, used under a Creative Commons license.

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