THE Papua New Guinean Treasury has released its 2017 Mid-Year Economic and Fiscal Outlook (MYEFO).
It is an extraordinary document.
Amongst the detail is a damning insight into Peter O’Neill’s continuing mismanagement of the budget.
And there is little doubt that the original 2017 budget was fiscally fraudulent.
The Treasury document indicates that the budget deficit is over K1 billion larger than forecast only seven months ago. The document states the deficit has increased from K1.9 to K2.8 billion.
This continues the pattern of the O’Neill government having consistently the largest budget deficits of any government in PNG’s history.
The actual deficit forecast is over K3 billion when the blowout in all debt interest costs is included. Debt interest is the third highest item of government expenditure – a fact hidden by O’Neill when describing the budget during the election campaign.
Interest costs have jumped because public debt has exploded from an estimate of K21.6 billion to K25.9 billion.
An extra K4.3 billion in debt within 2017. The fall in commodity prices occurred back in 2014-15 – why are the 2017 figures so wrong?
The debt to GDP ratio for 2017 blows out from 29% to 34.5%.
In the words of the PNG Treasury: “One measure of debt sustainability is the debt to GDP ratio. According to the FRA [Fiscal Responsibility Act], the debt ratio limit is 30% of GDP. The updated MYEFO estimate is projected to be 34.9% of GDP, which is 4.9% above the legislated limit.”
The Treasury foreshadows major expenditure cuts in a supplementary budget: “In the likely event that revenue falls, a reduction in expenditure through a supplementary budget is required of the government to keep debt within legal limits and consistent with the MTDS [Medium-Term Debt Strategy]”.
Some of O’Neill’s promises during the election campaign are extraordinarily expensive, and would make the outcome even worse.
In an extremely worrying comment, with no details provided, the PNG Treasury says: “Also captured in the Total Public Debt Stock Outstanding are the State-guaranteed loans now being serviced by the State.”
As the deficit is some K1.1 billion higher, and the total increase in public debt is K4.3 billion higher, the difference of K3.2 billion is probably the costs of the Oil Search share purchase debacle.
These costs are now being carried by all PNG taxpayers and not Kumul. That was a shocking deal for the people of PNG -and its legality has still not been tested in the courts (although a Treasurer was sacked over the issue).
The growth forecast falls slightly – it is now indicating, on per capita terms, that the PNG economy will go backwards by 0.4% in 2017. For too long, PNG’s economic performance has gone backwards.
Overall, this is an extraordinarily frank document. My credit to the brave PNG Treasury authors. Still, it is written by professional public servants, so punches have been pulled.
But between the lines, the only conclusion is one of extraordinary economic mismanagement.
It is a shame there was not more time for new members of parliament to reflect on the document before the scheduled vote on the new prime minister – especially given the nature of a ‘closed’ camp. The 2017 budget was fraudulent.
O’Neill has a track record that gives him an “E” for economic management. That is a sad legacy for PNG’s future generations.
Hopefully, a new government can start the process of economic repair.