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SUVA, (POST COURIER) – Grave concerns have been raised about increasing debt levels by the Papua New Guinea Government.
These concerns are in light of the estimates released by the Department of Treasury in its Mid-Year Economic and Fiscal Economic Outlook (MYEFO) report this week.
The estimates had highlighted a risk that the National Government may exceed its legislative debt limit in 2015.
The MYEFO released by the Department of Treasury this week states the June out turn debt to Gross Domestic Product (GDP) stands at 33.5 per cent of GDP.
This already exceeds the current legislated debt limit of 35 per cent of GDP for the years 2013, 2014 and 2015 as per the Fiscal Responsibility Act.
A statement released by the Treasurer Patrick Pruaitch this week stated that total public debt is projected to increase to K21.239.0 million(US$7.677.88 million)at the end of 2015, which is 41.3 per cent of GDP compared to the original budget estimate of K14,260.6 million (US$5,155.20 million).
Treasury had stated that this was reflective of the anticipated sharp decline in government revenue in 2015 and the assumption that there is no financing of public debt from asset sales.
Former advisor to the Department of Treasury Paul Flanagan argued that the debt level is much worse than the last economic crisis that the country experienced at the end of the 1990s.
“The estimated budget deficit for the 2015 blows out from an already high budgeted 4.4 per cent of GDP to 9.4 per cent.
“This would be the highest in PNG’s history. Public debt levels are expected to skyrocket from the earlier estimate of 27.8 per cent of GDP to 41.3 per cent,” he said.
He had agreed that the drivers for the rapid deterioration in PNG’s fiscal situation to be the fall in the international commodity prices, a growth slow down as well as sales of public assets not proceeding.
“The official estimate is now a fall of K1.6 million including additional revenue falls from lower gold and copper prices and production difficulties at some mines such as the closure of OK Tedi mine, due to growing drought conditions”.
He had expressed concerns that while cuts in expenditure would be necessary that this had not been detailed in the report.
He argued that any needed adjustments should have started in the first quarter of 2015 and any now would be extremely challenging.
Pruatich had stated that the department was aware of this risk and “is actively looking into revenue and expenditure options to mitigate the increasing debt level.
The report had stated that the PNG economy is expected to grow at 11.0 per cent in 2015 which it stated was a downward revision from the 2015 budget estimates of 15.5 per cent.