15/06/2020
2019 Final Budget Outcome – Extra capital investment, higher international support and better tax compliance
“I was pleased to provide Parliament with the 2019 Final Budget Outcome (FBO) today. This is an important document of budget accountability on how the Marape-Stevens government is starting the process of budget repair through the October 2019 Supplementary Budget. Overall, there is a some very positive news for the people of PNG:
International donor support was much higher than expected with donor grants being K832 million higher than expected;
Good, cheap concessional project financing was much higher than expected with K495 million extra for capital project expenditures around the country;
This increase in project expenditure was particularly done by the Asian Development Bank which invested K592 million in 2019, well above the original estimate of K287 million, in projects supporting airports and roads throughout the country;
Capital investment spending was K997 million higher than expected in the Supplementary Budget. Compared to 2018, capital investment spending is estimated to have increased by K1,420 million. This is good news for our children’s future, as well as good news for local businesses;
This increased international support lifted total expenditure in the budget from the 2019 Supplementary Budget estimate of K16,525 million up to K17,852 million – an increase of K1,327 million or 8 per cent – this is a massive domestic stimulus to the economy – much more than any resource project would have been able to deliver in its early FEED stages of development;
Domestic expenditure was kept tightly under control after the loss of control and fake figures provided in the initial 2019 O’Neill budget – so the FBO indicates expenditure was K14,765.1 million, actually just below, I repeat below by K0.8 million, the Supplementary Budget estimate; and
Domestic tax collections were K470 million higher than estimated despite no new taxes being introduced. This reflects the positive move back to a 5% growth rate in 2019 after the negative growth of 0.8% in 2018. It also reflects action starting to be taken on tax compliance.
“For all of these positive developments, there is also much work to be done to get out of the deep budget and economic hole left by O’Neill. The starting point for the 2019 Supplementary Budget was a deficit now estimated by Treasury at K4,985.8 million, even higher than initially estimated. So the starting point was going to lead to an increase in PNG’s debt levels by this extra K4,985.8 million. Through the 2019 Supplementary Budget, the Marape-Steven government was able to wind this back to K4,172 million. So the process of budget repair in the first year meant that debt was K813.8 million less than if the O’Neill 2019 had stayed in place. Frankly, we had hoped for an even lower budget deficit. We wanted to get it down to K3,503 million. But given that over 80% of the difference was because of the K495 million increase in good, cheap concessional financing directly tied to new capital projects around the country, the outcome was still a good outcome.
“The FBO process also indicates that even more work will be required to bring the operating budget under control (wages and goods and services) so that we can direct more spending to the capital budget. There is also further work required to improve the budget reporting systems to improve their accuracy and timeliness. I regret that the FBO came out later than it should have but issues around COVID-19 and improving the accuracy of the figures added to delays.
“Finally, I would like to thank all those involved in the FBO process. This includes people in Treasury and Finance as well as all those throughout our national, provincial and district administrations that work hard to keep our accounts in order, to collect our revenues, and to ensure that expenditures are effective. The budget and its accountability is in fact a massive team effort across the country so I thank all those involved for a successful 2019 budget outcome! I must also note, however that much more work lies ahead in slowly escaping from years of budget and economic mismanagement.
Hon.Ian Ling-Stuckey,CMG.MP
Minister for Treasury
11 June 2020
