2016 Budget Alert

Perspectives

2016 Papua New Guinea Budget

Facts, figures and key takeaways

The 2016 PNG budget has been framed in a much different environment than those preceding it. A fall in commodity prices, which significantly reduced expected Government revenues, coupled with the negative impact of drought conditions, forms the background to the 2016 budget. Accordingly, the theme of the 2016 budget is “Supporting Economic Growth Through Fiscal Discipline”. As the name suggests, a number of targeted expenditure cuts and structural reforms have been announced in this, and the 2015 Supplementary budget.

The PNG Government has framed its 2016 budget in a relatively weak world economic environment that is still adjusting to lower commodity prices with a GDP growth rate of 3.6% , up from 3.1% in 2015.  A domestic growth rate of around 4.3% is expected for 2016, which is significantly down from the expected 9.9% growth rate for 2015.  The softness in commodity prices is expected to continue over the medium term.

The changed environment for commodity prices has prompted the Government to dial back the numbers and the overall revenue and expenditure for 2016 have both declined, as compared to 2015, which has not happened for a number of years.  The total Government revenue for 2016 is expected to be K12,650.1 million and total expenditure is planned to come in at K14,762.6 million resulting in a budget deficit of K 2,112.5 million or 3.8% of GDP.  The Government now predicts it will return to surplus in 2020 as opposed to its original plans of doing so in 2017, reflecting the altered revenue position it now faces.

Key focus areas of this budget, which will be familiar to observers of previous budgets, include:

  • Expenditure prioritisation and improved quality of spending
  • Structural reforms among SOEs and in the size and efficiency of the public sector
  • The effective implementation of major projects through improved scoping, design, tendering and implementation processes
  • Continued support for key policy areas in education, health, infrastructure, agriculture, law and order and SME areas

Management of the Government debt profile with specific mention of a forthcoming roadshow to negotiate a sovereign bond in foreign capital markets.

2016 Budget Alert
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