Transcript
PAUL FLANAGAN: So the good news is this Budget allocates significant funding for health and education and for infrastructure. These are positive steps but very unfortunately, although these words are good the underlying numbers simply aren't believable. He is planning on a huge increase in revenues, over 20 percent, and as you go into the details of that, that revenue just is not going to flow so these good spending plans he has put in place, they're just not going to be affordable and cuts will occur later in 2018. It's a reall missed opportunity.
DON WISEMAN: Mr Abel sees significant improvement happening in the commodity markets,, but are those differences happening?
PF: In some ways there isn't a big expectation of increases in mineral resources here at all. The assumption for this kine 2 billion jump in revenues he's anticipating - in fact 2.2 billion kina, given revenues are going so badly in 2017, the assumptions are that this money will come from increased compliance efforts, from the tax office. The levels of that an extra 755 million kina - that's just not believable. He is assuming there will be over a billion extra in dividends from the already cash strapped state owned enterprises - those sorts of funds just aren't believable. And increases planned in goods and services taxes also are just pushing the limits of what any tax forecaster would be able to put forward in Australia or New Zealand or other countries, but these numbers normally just wouldn't get through a hurdle of "Are these numbers credible." And unfortunately they are not credible in the PNG Budget.
DW: So some months down the line there is going to be some recognition that the Budget figures weren't realistic, they are going to have to do something about it, what will they do?
PF: Well it will be a really interesting choice. APEC will be looming in November. There is a lot of national pride on the line. I think the costs they have set aside for APEC at 330 million kina are significantly understated. my undertstanding is that those costs will be more than double that amount. So they will be looking for extra money for APEC. I don't think they will be able to wind back the public service as much as they are planning to do. So they're going to be quite fixed costs, as are the interest costs. So these increases that are showing up for health and education and infrastructure, they seem easy targets. The decisions and things he did in the 2017 Supplementary Budget of cutting electoral funds, it looks like the Prime Minister is just totally opposed to those, so it is unlikely that they will look at those again, but hopefully they will. The other easy target is to just drop the bucket, whne trying to maintain their fiscal credibility to allow the deficit to blow out, to allow public debt to blow out. So that is significant risk as they try to fix this Budget later in the year.
DW: They do have the IMF involved and this is something you had been advocating.
PF: The IMF has been providing some technical assistance on items such as tax forecasting, balance of payments. They have indicated they want to get funds from the World Bank and the Asian Development Bank but there is no indication as of yet that they have actually gone to the boards of those institutions and those boards will want IMF involvement. The IMF has indicated that it thinks there should be a currency devaluation and they think there should be cuts in the electoral funding. Neither of those items, which could be seen as pre-requisites for IMF support, are in this Budget.
