Data from PNG Treasury, Bank of Papua New Guinea and World Bank says that the government of Papua New Guinea is expected to return its deficit budget to a surplus in year 2017.

This forecast comes about despite weakening mineral revenues expected in 2014 and 2015. As reported earlier by PNGLoop, the government also expects a marked slow-down projected for the non-mineral economy.

“The government expects to achieve this partly through somewhat faster growth in revenues and grants in 2013-2017 than during the commodity price boom of 2008-2012”, says The Papua New Guinea Economic Briefing, a report prepared by World Bank states.

The report however states that the key to the government’s balanced-budget projections will be cutting spending, at least in real terms.

“Overall these plans are only modestly ambitious, with the government projecting real per capita spending (which abstracts from the impact of both inflation and PNG’s 2½ percent to 2¾ percent annual population growth) in 2017 to still be at 2012’s historically high levels, although this gradually-declining trend would be a sharp reversal of recent years’ rising spending” the report states

The report adds “Still, achieving these cuts may be a challenge: while some of the new spending announced in the 2013 budget may be transitory (eg, preparing for the South Pacific Games that PNG will host in 2015), most new expenditures are likely to be permanent.

“The tuition fee subsidy, if implemented well, is likely to do much to support human development outcomes in PNG, plus it would be politically difficult to withdraw.

PNG’s own history through the 1990s and early 2000s shows that transfer for district grants and to local governments are very difficult to cut, even in times of extreme fiscal stress.

The report states that the government instead is looking to cut spending by national departments for service provision between 2013 and 2014, and to hold total spending on personnel at 2014 levels through to 2017, and transfers to provincial governments at 2013 levels through to 2017. 

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