In welcoming the document, the Prime Minister said the gravity and importance of the annual budget was appreciated by all members of the Government.
“The outcome of budget decisions have a direct impact on every man, woman and child in Papua New Guinea,” PM O’Neill said.
“For this reason the National Government must be careful, disciplined and forward thinking in each budget that we hand down.
“Spending must reach the people and improve their lives, and revenue must be raised in the modern world economy that continues to evolve and offer both increased challenges and opportunities.
“In recent years, the people of our country have experienced an improvement in health, lifestyle and economic opportunity that has never before been experienced in our country.
“Our Government will continue to manage the economic affairs of this nation in a way that that will continue to improve the lives of the men, women and children of Papua New Guinea.
“The Treasurer has commended the 2015 National Budget to the Parliament and the people of the nation.”
· Expenditure to be received by the people and invested in infrastructure
· Government income is higher than expected
· Managed return to budget surplus by 2018
· Economic growth very positive and well above global average
· Kina stabilizing following beneficial time for exporters
· Restructuring of employment with the evolution of mining projects
· Inflation reducing and stabilising
· Current account is moving into surplus
· Ongoing funding with debt reduction
· Total estimated government expenditure for 2015 is projected at 16.1991 billion Kina. This includes 9.2135 billion Kina in operational expenditure being spent directly on services used by the people of Papua New Guinea in 2015, and 6.9855 billion Kina invested in building capital infrastructure next year.
· Operational expenditure is allocated for schools, healthcare, security, support to agriculture and SMEs and other government services.
· Capital expenditure builds the infrastructure that continues to advance the national economy forward and also has the flow-on effect of stimulating business and creating jobs.
Significant areas of expenditure:
– Education expenditure of 1.9 billion Kina, including free schooling for our children, expanding access to universities and vocational training for adults.
– Healthcare expenditure of 1.8 billion Kina to facilitate healthier and happier living and longer lives for the people of Papua New Guinea, particularly in rural areas.
– Law and Order expenditure of 1.6 billion Kina to create safer communities. This includes additional and better trained police, correctional services officers and military personnel; better equipment; and, a stronger independent
– Direct Funding to Provinces of 3.7 billion Kina to ensure money is spent on services and infrastructure for people at local level in a planned and transparent manner.
– Infrastructure expenditure of 2.298 billion Kina to construct the roads, bridges, ports, buildings and other public facilities that will drive the national economy into the future. This includes infrastructure for the Pacific Games that will have ongoing community usage and contribute to healthy living.
Government income is higher than expected
· Total revenue and grants will rise to 13.9 billion Kina in 2015, which is 1.3 billion Kina higher than earlier estimates of 12.7 billion Kina.
· This includes tax revenue estimated at 11.2 billion Kina in 2015, an increase of 1.5 billion Kina from the earlier revised estimate of 9.7 billion Kina.
· The increased tax recipes include an additional 380 million Kina raised through improved and more transparent tax compliance measures.
· Project grants are anticipated to reduce by 200 million Kina from 1.5 billion Kina to 1.3 billion Kina due to factors that include international partner decisions and currency fluctuations. It is anticipated development support will continue to wind down alongside Papua New Guinea’s continued long-term economic growth.
Managed return to budget surplus in 2018
· The budget will see a deficit of around 2.3 billion Kina in 2015 driven largely by the Government’s investment in national infrastructure. This is planned investment in infrastructure that includes roads, airports, ports, schools, teachers and nurses colleges, and utilities that will be used by our people and businesses for decades to come.
· Budget deficits are planned for 2016, with a balanced budget in 2017, which is one year earlier than anticipated, and aim for surplus in 2018.
· Careful management of deficits and surpluses is sound economic planning particularly as this relates to infrastructure. If the government did not build the infrastructure now, the economy of the future would not be likely to reach its full growth potential.
Economic growth very positive and well above global average
· The national economy is expected to make significant growth in 2015 of 15.5 per cent. Earlier projected 2015 growth occurred ahead of expectations in 2014, so reduced the projected 2015 estimate.
· National economic growth is favorable compared to the global average as noted in the following table.
Papua New Guinea
2014 – 8.4
2015 – 15.5
2014 – 3.3
Kina stabilizing following beneficial time for exporters
· The Kina depreciated by 8.3 per cent in 2014 compared to 2013, mainly due to higher foreign exchange outflows and a strengthening US Dollar. The Government, in consultation with the Bank of Papua New Guinea and commercial banks, established measures to stabilize the Kina.
· The positive news for the change in exchange rates is that this has benefited Papua New Guinea’s exporters enabling more competitive pricing in international markets.
· Non-mining employment grew by 3 per cent to the end of the June quarter in 2014, though mainly due to the conclusion of the construction phase of projects, mining sector employment declined by 22.7 per cent. This was anticipated and with the greater experience and improved skill sets held by many of these workers, they will be absorbed through growth in other government and private sector construction projects coming online in 2015.
· Inflation will be better than originally projected in 2014 and 2015. The anticipated 6.5 per cent for 2014 has been revised down to 5.9 per cent. Inflation in 2015 is anticipated to ease to 5.5 per cent and further reduce to average around 5 per cent for 2016 to 2019.
· Papua New Guinea’s trade with the rest of the world continues to improve from a 3.9 billion Kina deficit in 2013, to 1.4 billion Kina deficit for the first half of 2014, to a projected surplus of 7.1 Billion Kina in 2015.
· Improvement is being driven by the awaited full year of LNG and Ramu Nickle mine production, as well as a rebound in agricultural and other mining production. This has been accompanied by a fall in foreign reserves from 6.8 billion Kina at the end of 2013, to 6.1 billion Kina in September 2014, and is expected to recover to 6.4 billion Kina by the end of 2014.
· Government debt is expected to fall by 228 million Kina to 14.26 billion Kina by the end of 2015.
· The Government has a preference to raise funds from the domestic market and this will continue as a priority where this is possible, while also exploring options to expand the national investor base through a range of cost-effective financing options.
· Managed debt is essential for the economic governance of any enterprise, but more important for government where the delivery of government services and infrastructure investment has direct impact on the livelihoods of families and viability of business around the nation.