NOOSA – In an expansionary budget that Papua New Guinea may not be able to afford, the biggest winner was…. the people….
No, just kidding. The biggest winner was the centralised administrative sector says Paul Flanagan, an economist who includes amongst his specialisations a close familiarity with Papua New Guinea.
In what at first glance looks like a perverse budget outcome, there was a transfer of nearly K1.1 billion from provinces and districts, effectively removing the discretionary spending previously controlled by governors and constituency MPs.
Despite drug and medical equipment shortages and escalating disease problems, the health sector was cut by 2% after allowing for inflation. And education received only a 1% increase, at odds with the government’s planning commitment to massively hike the number of teachers.
To me, this just doesn’t compute as being commensurate with the challenges facing PNG and is at total variance from the interests of the PNG people.
Flanagan sums it up as “a transfer of power to the central government and away from the provinces” and observes that “the political ramifications will be interesting.”
At least interesting, possible incendiary. Waigani doubles down on its neglectful approach to the people to favour what can only be seen as the best interests of a small cadre of politicians and cronies who really run the country.
“Taking a longer-term perspective from 2015 to 2019,” Flanagan writes, “there have been real cuts in transport of 36%, education of 30%, health of 17% and law and justice of 17%.
“The big longer-term winners have been utilities, debt servicing, the economic sector and administration.”
Note ‘debt servicing’ – those loans come with a big budget price tag.
“Actual expenditure patterns have often not matched the policy language,” observes Flanagan.
In saying this, he also points out that price changes mean that a 2015 kina could buy 26% more that it does now. Even a 2017 kina could buy 11% more.
But by far the biggest change in this budget is the cut of nearly K1.1 billion, or 26%, in the allocation to provinces which is transferred to the central administrative sector.
The budget documents explain that this funding has been transferred to the Department of Implementation and Rural Development.
“The political implications of this are uncertain,” Flanagan says. “From a budgetary perspective, this is just a transfer of funds. From a political perspective, there are more significant implications."
He writes if such a shift happened in Australia “it would cause a massive rift in Commonwealth-State relations”.
A signature policy of the new O’Neill government in 2011 was a large increase in providing more funds to local MPs and governors to spend in their constituencies.
It reflected O’Neill’s views at the time on the benefits of increased decentralisation. Now, it seems, those views have been abandoned along with the slashing of provincial funds.
“There have been serious doubts about whether K10 million [to each parliamentarian] was too much, whether it has been well spent and whether there has been accountability for this expenditure,” writes Flanagan.
“Possibly the transfer could be seen as a good administrative move for fiscal accountability given poor reporting under previous systems, but it is a very interesting and politically sensitive change.
“A national government minister now in charge of this funding, rather than governors and local members. Possibly expect fireworks.”
Flanagan also remarks that the budget “was clearly disappointing for its 1% real cut in health funding [which] is hard to reconcile with the proposed massive increase in the number of health workers."
He plausibly points out that “the 17% real cut in funding over the last five years may have contributed to the outbreak of polio and increasing incidence of tuberculosis and malaria.
Flanagan also says that “talk of ‘free health’ has always been a fiction with an allocation of only K20 million a year since 2012.
“Recent reports indicate parliamentarians have suffered from this deception when seeking even basic anti-malarial drugs.”
So K1.1 billion is returning to the central government at a time when revenue is scarce in PNG. Looked at against this backdrop, it's probably no surprise.
What will be a surprise is if these funds are redistributed in a more efficient and equitable way so the vast bulk of the population benefits.
Given the O’Neill government’s track record, there’s no point spending more than a nanosecond pondering whether that might happen.