Supplementary Budget on the cards after Papua New Guinea Treasury flags worsening deficit


The Papua New Guinea Government has acknowledged the need for action to deal with a worsening Budget deficit, blaming lower global commodity prices, with the Prime Minister flagging cuts to government expenditure.

PNG Prime Minister, Peter O'Neill

PNG Prime Minister, Peter O’Neill

Last week, PNG’s Treasury released its Mid Year Economic and Fiscal Outlook (MYEFO) report, which revealed the government deficit is set to increase this calendar year from an expected 4.4% of GDP, to 9.4%.

Public debt is also projected to soar from a forecast 27.8% of GDP to 41.3%, said the Treasury report, adding ‘the updated MYEFO estimate is, however, expected to increase to 41.3% of GDP, which is 6.3% higher than the legislated debt limit.’


Prime Minister Peter O’Neill blamed low commodity prices for the deficit blowout. He told local media: ‘The downturn in commodity prices has affected our budget bottom line this year–but our economy is proving resilient and can absorb these shocks.’

He added that GDP growth was expected to remain around 11%, saying: ‘Our inflation remains very stable at around 4% and our foreign exchange reserves are stable, covering almost nine months of increase.

‘That is higher than many parts of the world where usually many import cover is only around three months. Our foreign exchange rates with our trading partners are very stable.’

O’Neill said spending cuts would be needed because of reduced revenue and government departments would be asked to suggest areas for savings.

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The Treasury report acknowledged ‘the deterioration of the Government Fiscal Balance as a result of lower than expected revenue due to low commodity prices’, but has also warned an expenditure cut exercise ‘may be insufficient to fully compensate for this.’

‘But what is really surprising is the fall in non-resource revenues,’ noted former PNG Treasury adviser, Paul Flanagan, who blames falling commodity prices, a slowdown in growth and the sales of state assets not proceeding.

‘There are also now major falls predicted relative to budget in GST revenues (K400 million), personal income tax (K125 million), company tax (K124 million) and excise (K66 million): all of these are now estimated at 2014 levels or below.’

Supplementary budget?

The ABC reports a supplementary budget is expected to be introduced before Parliament resumes on October 26. Last week, Treasurer Patrick Pruaitch announced that the government ‘has and will continue to review its position including handing down an Appropriations Reduction Bill in 2015.’

‘Cuts will be made to non-priority areas where projects that can be deferred to next year and the following year,’ said Prime Minister O’Neill this week.

‘But there will be no cuts to key priority areas that affect thousands and thousands of families and individuals. Health, education, law and order and infrastructure are too important and there will be no cuts in these priority areas. We are reviewing all ongoing Government expenditure and identifying waste.’


  1. Tom Monemone says

    There appears to be inconsistencies in the total National Debt at the end of 2015 between the PM, Treasurer Pruaitch and BoPNG, Leo Bakani. Is the PM in charge of both fiscal policy and monetary pokice?

  2. Jerry Degemba says

    Invest in agriculture and there will be abundant wealth to run this country without deficit.

  3. Gabriel Plumgawi says

    I am asking the the Government to legalize immoral activities such as pornography and prostitution to help boost national income and minimize deficits. We can’t pretend to be good christian nation and building our economy through genuine investments. We have a need here to protect and sustain our national finance. Corruption in PNG is also contributing to economic deficits. This is one bad option we can employ should there be no other ways to eradicate deficits. If genuine ways of earning of earning national income can not sustain us at this deficit period, we can do something bad to boost national economic growth under state controlled effective regulations.

  4. Rosemary Leo says

    PO is a very decisive leader that’s admirable. He has made some decisions which are a damaging in a short term but we will surely benefit in the near future. Stop criticizing too much. You have the land so turn to agriculture for survival. All people should know their priority areas, start spending on those areas and stop expecting PO’s gov’t to feed them.

    • Gabriel Plumgawi says

      I agree with Naomi commenting on priority areas. What is the purpose of having a government in PNG? IS to represent and facilitate the welfare of this country and not the State. State is facilitating its interests that is why we have a budget deficit. The cost of living is increasing everyday of every successive year. Even most of Papua New Guineans are suffering from laws favouring some people and not others. Simple citizens spending alot of money to buy law to solve to their personal problems. This has happened before now.

  5. Naomi Ngala says

    I do not agree with what the Prime Minister said about the priority areas are Health,education, law and order… are too important because thousands of people are affected in this area. Yes he is right, but what he missed out here is the Agriculture Sector. It should be one of the main key area. If there is enough and nutritious food for people to eat, health will not be a problem. Economically, agriculture is the main source of income for the rural population from cash crops, horticulture, livestock. So why not having AGRICULTURE as the priority area as well.

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