Following the 2020 National Budget presented by government last week, Deloitte stated in its review that the firm acknowledged that the government of Prime Minister James Marape had been in power for a short period of time but had undertaken a substantial exercise in restating and reforecasting the budget numbers.
"We commend the government for undertaking that difficult work and having buy-in from multilateral partners, including the Australian government and the International Monetary Fund," Deloitte said in its review presented last week.
Deloitte said the 2020 Budget took a dual path to growing the PNG economy, through both a non-resource sector focus and short-term stimulus.
Key themes of the budget include:
• Budget repair and economic recovery through fiscal consolidation to reduce the budget deficit equivalent of 5.8% of the economy to 5% in 2020, and 1.9% by 2024;
• Development of strategies to increase revenue; including measures to increase compliance by taxpayers;
• 2020 expenditure set at K18.7 billion, largest in PNG history;
• Focus on reducing wasteful expenditure, improved accountability and increased expenditure in rural areas;
• Wages and goods and services expenditure will be reduced from 16% of non-resource GDP down to 10.6%;
• Seeking equitable distribution of resource sector benefits;
• Financing - seeking further debt capital to meet budget deficits:
Deloitte said the government had several options open to it:
• First option - focusing on multilateral partners (such as Australia) who can provide debt on favourable terms. For example, expansion of recently announced $US300 million by a further $200 million (K680 million);
• Second option - leveraging World Bank, IMF and Asian Development Bank guarantees and partial guarantees to minimise repayment interest rates as compared with sovereign bond issuance;
• A total of K2.5 billion over three years in respect of unpaid amounts relating to salaries and wages and contractual commitments (for example construction/road work) carried forward since before 2019 and;
• Restored cooperation with the International Monetary Fund to support PNG's government reform agenda in order to rebuild credibility.