Record Budget and higher deficit feature in 2015 Papua New Guinea Budget forecasts


The Papua New Guinea Treasurer Patrick Pruaitch has presented a record K16.2 billion national budget for 2015, but with an increased deficit to K2.272 billion.

PNG Treasurer Patrick Pruaitch at a post-Budget breakfast briefing

PNG Treasurer Patrick Pruaitch at the traditional Badili Club post-Budget breakfast

In his Budget speech, Pruaitch forecasts the economy to grow by 15.5 per cent ‘driven by a full calendar year of gas production and supported by a rebound in the non-mining sectors’.

It will be PNG’s 14th successive year of economic growth.

‘PNG is among of a handful of nations to sustain growth through this period,’ he told the annual Badili Club/PricewaterhouseCoopers (PwC) budget breakfast in Port Moresby this morning.

‘The 2015 Budget has been framed against a backdrop of moderate, albeit strengthening global economic growth and continued domestic growth underpinned by the commencement of LNG exports,’ according to a post-Budget briefing note by PwC.


ANU's Stephen Howes

ANU’s Stephen Howes

Analysis released overnight by Deloitte PNG notes the Budget is consistent with the strategy of the last two years, and was accompanied by a 2014 supplementary Budget intended to reallocate expenditure to high priority areas, notably infrastructure for the 2015 Pacific Games in Port Moresby, and prevent a Budget blowout for the remainder of the fiscal year.

Professor Stephen Howes, the director of ANU’s Development Policy Centre, says the Budget is ‘restrained’.

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‘If you look at the last few years, we’ve seen growth of between 15 and 20 per cent. But this year it’s only about seven per cent, slightly more than the rate of inflation at 5.5 per cent in 2015—the same as 2014,’ he told Business Advantage PNG.

Overall, planned government expenditure is up seven per cent, while projected revenue is up 10 per cent.

From 2016 onwards, all mining and petroleum tax will be deposited into the Sovereign Wealth Fund instead of flowing directly to Waigani Public Accounts.


The National Development Bank's Moses Liu

The National Development Bank’s Moses Liu

The Budget will be in deficit by K2.272 billion, or 4.4 per cent of GDP, with the debt to GDP ratio for 2015 falling to 27.8 per cent from the revised 2014 figure of 35.5 per cent.

The deficit, the Treasurer says, will be financed by development loans (K0.8 billion) and domestic borrowing (K1.5 billion).

Budget analysis by KPMG indicates the government is aiming for a balanced budget:

‘The Government is targeting a reduction in its expenditure in future years to sustainable delivery levels which combined with an increase in revenue largely driven by the PNG LNG project, is forecast to bring the budget into balance in 2017,’ said KPMG’s Managing Partner in PNG, Troy Stubbings, in a paper released this morning.

Debt reduction strategy

The Treasurer outlined a four-part debt reduction strategy:

  • Sale of 4.27% of the LNG project currently owned by National Petroleum Company PNG Ltd (NPCP) to landowners, valued at US$1.024 billion;
  • Broaden range of financing tools beyond Inscribed Stock, Treasury Bills and foreign currency denominated loans from development partners.
  • Issuing Stock worth K1.2 billion in 2015 (K1.92 billion 2014);
  • Increase domestic debt portfolio weighting to longer term securities.

But Deloitte analysts say the timing of the sale for the 2015 fiscal year is ‘optimistic, if it is to be achieved’.

‘The Government is targeting a reduction in its expenditure …  to bring the budget into balance in 2017.’

Sovereign Wealth Fund

The Budget also contains provisions for the long-awaited Sovereign Wealth Fund (SWF) to manage the large revenues expected from the PNG LNG gas project and other projects.

It will incorporate two funds: a Stabilisation Fund and a Savings Fund. From 2016 onwards, all mining and petroleum tax will be deposited into the Sovereign Wealth Fund instead of flowing directly to Waigani Public Accounts.

Parliament is expected to debate the law covering the SWF in the session following the Budget session.


An LNG shipment, a major source of income for the Sovereign Wealth Fund

An LNG shipment, a major source of income for the Sovereign Wealth Fund

With Pruaitch announcing the Tax Review Committee is now due to report its recommendations by July, 2015, there were no changes to the tax rates.

However, as David Caradus, Tax Partner at PwC, noted at this morning’s budget breakfast, there is a lack of resources to administer tax law at Internal Revenue Commission: ‘Investment Promotion Authority data indicates that there are 42,522 registered companies in PNG, but just 2000 pay corporate income tax’.

District Schemes

One area of concern for Professor Howes is the 50 per cent increase in funds through the District Support Improvement Program (DSIP), which is administered by individual MPs. Two new programmes will be set up, one for education and one for health.

They will receive K15 million, up from K10 million per year, he estimates.

‘It sounds good but normally in PNG if funds are allocated to the district that means they are control of the MP,’ he told the ABC.

‘PNG has gotten into the practise of putting substantial amounts of funding at the discretion of MPs.’


Members of the Papua New Guinea government, including Treasurer Patrick Pruaitch (centre) and Prime Minister Peter O'Neill (right)

Members of the Papua New Guinea government, including Treasurer Patrick Pruaitch (centre) and Prime Minister Peter O’Neill (right). Credit; RNZI

The National Development Bank Managing Director Moses Liu has criticised the allocation of K50 million (a fall of K 31m) to the bank will impede the operations of small and medium enterprises (SMEs) in the country.

Kina to strengthen

Pruaitch also said the kina had stabilised and predicted it would rise next year.

He said the Kina has depreciated by 8.3 percent against the US dollar and 3.0 percent against the Australian dollar from January to October 2014 compared to 2013.

‘Going forward, the value of the Kina is expected to strengthen when proceeds from PNG LNG exports starts flowing into the country,’ he said.


Debate on the budget has been adjourned to next week because the government was late providing MPs with Budget papers for analysis and discussion.

Spending highlights of the 2015 Budget

  • Law and order: K1.6 billion (2014: K1.3 billion);
  • Education: K1.9 billion
  • Health: K1.8 billion
  • Provinces: K3.7 billion
  • National Highways: K238.9 million
  • Highland Highways: K150 million
  • City roads: K293 million
  • Bridges and Rural Access roads: K57.2 million
  • Port Moresby International Terminal: K30 million
  • Lae Port Development: K23.6 million
  • Port Moresby and Lae electrification Project: K118 million
  • Port Moresby Sewerage project: K50.6 million
  • Rural Telecommuncations: K12.3 million
  • National Broadband Network: K8 million
  • Agriculture: K730 million
  • National Development Bank: K50 million
  • Infrastructure corridor development: K50 million
  • Agriculture Commercialisation Equity Fund: K50 million
  • Pacific Marine Industrial Zone: K33.8 million
  • Wharves and Jetties rehabilitation: K20 million
  • Fisheries Surveillance: K10 million
  • Wagan Wharf Development: K10 million
  • Tourism: K20 million, plus K10.2 million for the Kokoda Track Initiative


  1. bob siape says

    The so -called agriculture commercialization fund of K 50 million allocated in the 2015 budget should have a very strict control and monitoring mechanism in place and all monies should be allocated to the ration of population and size of all districts and go direct to all the districts in Papua New Guinea. It should be administered by the Department of Agriculture and oversee and monitored by all District Development Authority and check and audited by a team from National Planning or the Auditor Generals office to ensure transferancy and prudent management.

    The District Development Priority Committee should recommend certain agricultural projects with very high economical viability in the districts to the the Departments of Agriculture ( branches in the provinces) for funding. The Departments of Agriculture for screening purposes must work closely with the respective District Development Authorities and work together to achieve the implementation of the projects. The Division of Agriculture in the respective districts in Papua New Guinea with the supervision of the District Development Authority and the project managers should do a full acquital on the funds allocated to the auditors for actual/ physical check to verify and do a final report back to Waigani for further ellaborations/fundings etc,.

    I hope should we have a very stringnent mechanism to control and monitor the projects and only those projects that fall within certain category of commercialization in district are given priority than to wantok and systematic way of diluting funds to few selected political cronies in Waigani savanah.

    We will only realize the governments dream of physical economical development happening in all districts throughout PNG and see every citizen par-taking and participating more meaningfully from the roots up and consequently result to economical and developments benefits trickled down straight to the district levels than having the funds allocated in every budgets fooled here in Waigani and given to few purported farmers through a standardized monitoring system.

    Bob Siape
    Lake Kopiago.

  2. Samuel Nessau says

    The SIP funds for LLGs have a drastic cut in the 2015 budget. Did any of the National MPs debate for an increase instead of a cut? MPs be prepared to face and address all needs of the people of your district whom for just this year were not too concerned about what you do for them with the DSIP funds because the LLGs kept them busy with all their small project funding needs.
    I am calling for greater recognition of LLGs.
    Districts are not a Government. Local Level Government is a Government which truly represents the majority of our people and as such its administrative and financial capacity to deliver services must be increased.

  3. Could someone specify the allocation for city roads of K293 million? I am just wondering if only Port Moresby and Lae are going to benefit. I suggest all provincial capital headquarters must and should be included as they are being negleted for so long.

  4. Bernard Kelontii says

    Agriculture Commercialisation of K50 m, is it for downstream processing projects?

    K730 m for Agriculture Sector …… how much is it planned to go into actual activities and I suggest, it be allocated directly to Districts for its identified projects other than it being diluted in Waigani Savannah.

    B. Kelontii

  5. What is the agriculture
    commercialisation fund of K50 million to be used for ?
    How is the K700 million funding for agriculture that involves 80 % of our people to be allocated.
    no Waigani Swamp fsrmers please
    …John Nightingale

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