PNG budgets not well-managed: academic

THINGS often are not what they seem to be. Take the widespread view that the PNG Government of Sir Michael Somare has done a good job in terms of budgetary controls with small surpluses in recent years. By Brian Gomez

An Australian economist, Roderick Duncan, a lecturer in the School of Marketing and Management at Charles Sturt University, debunks this notion in the lead article in the Australian National University's latest Pacific Economic Bulletin.

He wrote: "Unfortunately, spending has increased rapidly in the recent budgets, the public debt has not been significantly reduced in nominal terms and the current budget is very vulnerable to downturns in the prices of mineral exports.

"The Treasury talks about fiscal discipline, but there is not much evidence of discipline in recent budgets.

"In per capita terms, the PNG economy is no more productive than it was in 2001."

Duncan says the lack of progress in terms of institutional problems "means that future GDP growth is not likely to meet the 4% forecasts that Treasury puts forward".

Future foreign and domestic investments, he suggested, will be concentrated in the resources sector and of little value to the majority of Papua New Guineans.

Of particular concern to Duncan is the 2.4 billion kina ($US807.5 million) in extra spending that Treasury has added in recent months through its 2006 supplementary budgets and the 2007 windfall gains expenditure, expressing doubt that the public service has the capacity to properly spend and administer this money.

He said it would have been better to use up the funds to reduce public sector debt and to keep it for use in future years.

Duncan says while the Somare Government has done well in terms of various macroeconomic variables, it has made no progress at the micro level, or gone backwards in some areas.

"A long-term concern is that Papua New Guinea may become a country of reform without growth," he wrote.

Duncan's article provides another timely reminder that throwing budgetary funds in various directions following the receipt of windfall earnings from commodity exports is not a sure-fire answer to speedier economic growth.

This is especially so when lots of vital areas of spending have been neglected for long periods of time.

This has been inevitable because big portions of the budget have been made up with Australian and other foreign aid.

Nevertheless, budgets over the years have not been adequate to provide basic services and the recent windfalls provided a lot of opportunity to catch up.

The country's premier university, University of Papua New Guinea, has had no maintenance or development work done on it for over three decades.

Together with the University of Technology in Lae, they were awarded K50 million for this purpose some six months ago.

But as Duncan suggests, there are signs that these funds have yet to be utilised and there are serious questions about the bureaucrats who want to keep building their empires.

Other tertiary institutions feel they should also be sharing a piece of the pie, and thus far no one's got any. Hopefully, not too much will end up wasted and in corrupt hands.

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