Supplementary budget imposes greater austerity on Papua New Guinea’s economy


The Papua New Guinea government has brought down a supplementary Budget to address what it described as a ‘record budget deficit.’ The Minister for Treasury, Ian Ling-Stuckey, claimed it is necessary to get the Budget within sound fiscal limits.

Parliament during the Supplementary Budget presentation. Credit: RNZ

Ling-Stuckey said the Supplementary Budget ‘starts the difficult process of bringing the budget under control and avoids the country having to incur its largest ever deficit.’ He claimed it is also necessary to maintain ‘domestic and international’ confidence in PNG government finances.

Ling-Stuckey claimed the budget deficit was K4.76 billion, which would be lowered to K3.5 billion by making K1.5 billion cuts in expenditure. These are to be applied across all programs, but cuts to education and health will be avoided.

He said the aim would be to redirect funds to stimulate growth in the economy. But he warned that it would take years, not months, to restore the Budget.

‘There is an additional K122.4 million to cover increased interest payments.’

‘Tough decisions are a must now, to take a major step towards living within our means. These steps alone won’t solve our economic problems, but if we demonstrate better budget management we can better direct funding.’

Deficit finance

Treasurer Ian Ling-Stuckey.

Ling-Stuckey said K1.557 billion is needed to finance the deficit. The government will be seeking support from the World Bank, the Asian Development Bank and other countries ‘on the right terms’, including Australia, with the outcome to be announced within the next months.

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The government will also be seeking support for its debt issuance in the domestic market.

He said paying small-and-medium enterprises (SMEs) is critical to maintain employment and boosting the private sector. But he said K300 million of public works arrears will be deferred to next year in order to establish a ‘comprehensive vetting process’ with the Department of Works.

‘The 2020 and 20201 Budgets will need to continue the reforms.’

He said there is an additional K122.4 million to cover increased interest payments, which, he said, ‘highlights’ the debt accumulation under the O’Neill government. ‘This increases the need to find good debt and lower interest costs.’

Ling-Stuckey pointed to ‘unrealistic estimates’ of government consumption and the need to avoid ‘continual unexpected increases.’

He said if the government was to accept the government increases, then ‘the government deficit would ballon out to K4.636 billion – an extraordinary K500 kina for every person in PNG and over a billion kina worse than the previous worst budget deficit in our history.’


The 2020 National Budget is due to be tabled before Parliament next month. Ling-Stuckey said the 2020 and 2021 Budgets will need to continue the reforms. Papua New Guinea’s debt to GDP ratio was also announced to have risen to 39.8 percent, well above the legal stipulated limit of 35 percent.

It has been reported that Parliament voted to increase the debt cap to 45 per cent.

Ling Stuckey said the government has been ‘talking to the ADB and World Bank. He said that, following consultations between the Prime Ministers of Australia and PNG, ‘there are very promising signs that budget support could be available from Australia’ with a major payment in 2019.

He added that PNG will explore other budget support options from other countries, but ‘at this stage, Australia is the only country that has offered to step forward and help out’.

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