PNG Economy: Expenditure is more than the revenue

Deputy Governor for Bank of Papua New Guinea Dr Gae Yandabing Kauzi during a presentation at the Annual PNG Human Resource Institute Conference at Crown Plaza has clarified on the outlook of the PNG Economy.
Dr Kauzi said currently the country has a budget deficit, which simply means, government expenditure is more than the revenue into the country.
He said the national government had a balanced budget up till 2011 but then starting 2012, expenditure had been exceeding the revenue causing the deficit.
Dr Kauzi said the philosophy of current government to spend more on LNG construction phase thinking that LNG payment will sustain the economy has led the country to increase its debt level.
He said government expenditure exceeds with expectations that revenue from LNG exports will stimulate economic growth which will help the country and the government to pay its debt over time.
He said commentators mentioned that the level of how much the government has borrowed from domestic sources and external sources has grown in size. The Fiscal Responsibility Act states that government cannot exceed the limit of borrowing from domestic or external sources.
Dr Kauzi said there are legal limits set under the act for the borrowing of funds by government. He said government cannot exceed 30% of borrowing set under the act. More than percentage requirement is deeming illegal. He further stated national government has considered this and their borrowing percentage is not above the requirement percentage.
It is because of the budget deficit that government will now focus on investing in priority areas such as education, health, law and order, infrastructures, and other key priority areas.
He also clarified on the topical issue of the economy the lack of foreign currency.
He said because of low commodity prices being encountered, supply of foreign currency has not been good. Dr Kauzi said currently the demand for foreign currency is more than the supply. He says Central Bank’s views on the low flow of foreign currency are the way commercial banks and two other authorise dealers of foreign currency Moni Plus and First Investment Finance (FIFL) distribute foreign currency.
He says Governor for BPNG Loi Bakani issued various directives to authorise dealers for BPNG intervention but nothing has been done. He says some foreign currencies are being used for lending.