2019 Budget aims to broaden economy and increase expenditure and revenue

The Treasurer, Charles Abel, has handed down Papua New Guinea’s 2019 National Budget, revealing a sharp jump in revenues and expenditures. He said he is looking to broaden the economy and announced changes to personal income tax thresholds.

Treasurer Charles Abel at the Budget lock up yesterday. Source: INA

‘We need to spur investment, bring in foreign exchange and to create jobs,’ said Abel yesterday, on the aim of the 2019 National Budget.

‘(All) while we keep our eye on this broader based economy, which is what this Budget is all about: creating those longer term quality jobs, building the middle class of Papua New Guineans, that is so important.’

Abel said employment is ‘not growing as fast as we would like,’ but he said the trend is positive.

‘Total government revenue is forecast to rise from K12.731 billion to K14.266 billion. This is up 12 per cent.’

‘We had shot up in 2014, with gas, and then went down with that major construction phase finished. But it has been, overall, trending upwards.

‘I think it is very important that the government keeps a strong focus on employment generation.’

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Forecasts

Total government revenue is forecast to rise from K12.731 billion to K14.266 billion. This is up 12 per cent.

Expenditure is expected to be up from K14.718 billion in 2018 to K16.133 billion, which consists of K10.63 billion in operational expenditure and K5.5 billion kina in capital expenditure—an increase of K1.1 billion, or 9.6 per cent.

Funding priorities

There will be K130 million allocated to the upgrade of the Highlands Highway, K32 million to kick start five new highways, K90 million for provincial airport redevelopment and K75 million for the redevelopment of Lae’s Nadzab airport.

Other rural airstrips will also be redeveloped.

‘Papua New Guinea’s total debt to GDP is expected to fall from 32.2 per cent in 2018 to 30.8 per cent.’

Health sector funding is budgeted at K455.6 million, including K100 million for district hospitals and K55 million for the establishment of a new provincial hospital.

The Education Department will get K1.3 billion, a 6.6 per cent increase.

Tax revenue is expected to increase by K465.5 million, while non-tax revenue is expected to rise by K482.5 million.

Net borrowing is expected to drop from 2.5 per cent of GDP in 2018 to 2.1 per cent.

Papua New Guinea’s total debt to GDP is expected to fall from 32.2 per cent in 2018 to 30.8 per cent.

Non-resource GDP is forecast to be weaker, however.

On track

Analysis of the Budget produced overnight by KPMG observes the Government plans to fund the full 2019 budget deficit financing requirement from external sources and complete their debt retirement plan in mid-2019.

‘Has the Government remained on track? … it appears so.’

It notes the Government’s success at raising its first US$500m (10 year) sovereign bond will result in similar financing initiatives planned for 2019.

‘The Government has secured an additional US$600m direct budget support over three years from the Asian Development Bank and the World Bank, and are looking at securing a US$300m low-cost 2019 Budget support loan from a commercial bank.

‘Has the Government remained on track?

‘With the Government confident of beginning 2019 on a very sound fiscal basis and with financing in place to execute the 2019 Budget from day one, it appears so.’

Increased protection

One key feature of the Budget is measures to support and protect local industry in the form of increased tariffs.

Customs tariffs have increased on imported retail flour, unprocessed fresh or chilled chicken, tuna, mackerel, wooden furniture, shopping bags, and soap and laundry soaps. A tariff has been imposed on imported milk and cream for the first time (25%). All these are products produced in PNG.

Meanwhile, the 10% tariff on imported bulk flour has been removed, as has the excise on a range of consumer goods no longer considered luxury items.

An export tax on K15 per kilo on seas cucumber has been proposed.

Personal taxation

The personal taxation threshold has been increased to K12,500 per year from K10,000 a year.

‘We are very pleased to be in a position to pass back K162 million in terms of the relief on the income tax side,’ said Abel.

‘It applies to everybody who is earning a wage, but proportionately the impact is greater on those who are at K20,000 a year, or below.

‘Hopefully, 30 or 40 kina a fortnight translates back to our people.’

The next tier has been increased for K20,000 from K18,000, reducing the tax rate from 22 per cent to 20 per cent.

‘It won’t make anyone rich, but it will provide some modest relief for those struggling with the cost of living,’ comments Paul Barker, Executive Director of the Institute of National Affairs.

2019 Budget personal tax rates Source: KPMG

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