Tag Archives: economy

Budget Hope

The National


THE Government is viewing the future with optimism and confidence as it tables the 2018 national budget in Parliament today on the back of an “improving global economy”, with commodity prices returning to “healthier” levels.

Prime Minister Peter O’Neill, however, warned that while pressure on the economy from global factors is easing, the government would continue to ensure fiscal discipline is maintained.  “There is no doubt that we are seeing improvements in the global economy, and this is reflected in positive indicators in our own economy,” he said.

“Commodity prices are returning to healthier levels but there is still a long way to go before we can relax.

“When global conditions were at their lowest, our government managed the challenges we faced and this has placed us in a stronger position today.

“We continued to maintain positive economic growth through a programme of reducing spending, managing expenses and rescheduling some infrastructure construction.”

Treasurer Charles Abel will table the national financial plan this afternoon.

Debate on it will be suspended until Tuesday next week to allow the Opposition time to respond to it. O’Neill said the government was looking forward to a sensible debate on the budget “that is based on fact and not misinformation”.

He said there would be no cuts to education and healthcare, “our core national priorities”.

He also promised “a productive and safe Apec summit in 2018 through modest expenditure that builds capacity and leaves legacy in our government agencies”.

“Our Government will also continue to build more efficient public services that are increasingly capable while being less expensive to operate,” he said.

Shadow Treasury and Finance Minister Ian Ling-Stuckey said the Opposition was ready to debate the 12-month financial plan from the government.

“Last year, the Government did not allow a proper debate on the 2017 budget. We stand ready to judge the success of the 2018 budget and urge government to give the Opposition an opportunity to measure its merits,” he said.

He said they would judge the budget on its credibility, how the government planned to spend public money, how it addressed foreign exchange and jobs, how it dealt with deficits and debt financing, and whether it followed proper processes.


State Adjusting to Economic Situation, says Fleming

The National


THE government’s sale of its shares in Oil Search shows that it is willing to adjust to the current economic situation, Bank South Pacific chief executive Robin Fleming says.

Fleming told The National that businesses would be anticipating similar undertakings by the government in the 2017 Supplementary Budget.

“The supplementary budget is important for business as it will be the first significant outcome of the government’s 100-day plan and an excellent signal to the business community of the specifics associated with the implementation of the plan,” Fleming said.

“Kumul Petroleum Holdings recently announced the sale of its Oil Search shares with the consequent exit of the UBS and JP Morgan-structured debt facilities.

“It indicates the government’s preparedness to make decisions that recognise current economic conditions.”
Fleming said the government could eliminate or defer commitments not critical to its long-term development plans.
“This is not to say that some of those longer-term developments are not important,” he said.

“But in the short-term, the focus should be on meeting any residual payment obligations from operational or development expenditure, where services have been provided or procurement completed.

“Payment and settlement of any such debt will provide cash flow for many businesses in PNG.”

Kina Overvalued And One Option Is To Have Dual Exchange Rate, Says Economist

Source: Business Advantage PNG

The kina is more than 20 per cent overvalued, according to economist Marcel Schroder, speaking to a joint University of Papua New Guinea/ANU event in Port Moresby. One option is to introduce a dual exchange rate for a limited time.

BA 1

‘When people talk about an over-valuation of the kina, it is really hard to know by how much,’ said Marcel Schroder, a lecturer in economics at the Development Policy Centre in the Australian National University (ANU).

‘We updated (our estimate) last year, 2016, and it is still about 22 per cent overvaluation.’

He said this year the estimated overvaluation of the kina will be increased.

Schroder acknowledged that, for an economy like PNG that lacks diversification, there are arguments against letting the currency fall.

‘There are (some) good reasons not to devalue. One is that it could be inflationary. It means that imports will be more expensive, especially when it comes to essential imports like rice and pharmaceuticals—poor people are already struggling. That is not a good outcome.’


The question is whether the economy is ‘elastic’: able to rebound from the re-pricing of the currency. ‘In theory, when the exchange rate depreciates it stimulates exports,’ said Schroder.

‘Revenue from mining petroleum taxes, which peaked at K4 billion during the boom, has almost disappeared.’

‘But PNG has no [export] manufacturing, so what do we export? We are price takers when it comes to commodity prices.’

One option, according to the 2017 PNG Economic Survey, which was co-written by Schroder, ANU economists Rohan Fox and Stephen Howes, and UNPG economist Nelson Atip Nema, is to retain the current kina rate for essential imports and depreciate the kina by 20 per cent for all other transactions.

Schroder believes empirical evidence suggests that, over the medium term (typically two years), exports will be stimulated by devaluation.

‘It is easy to wait for the next commodity price hike, or LNG project. But it is a bit defeatist and the costs in the short run really damage the economy.’


BA 2

The ANU’s Marcel Schroder

Schroder claimed an overvalued exchange rate lowers economic growth, and investment in future projects ‘because businesses find it hard to find foreign exchange for crucial intermediate goods and capital goods.’

He said the shortage of foreign exchange is putting PNG businesses that purchase internationally under pressure. Many need to wait between eight and 16 weeks to have their foreign exchange orders processed.

‘That is quite a long time. Credit lines are usually between 14 and 30 days. So they are banking on the patience of overseas suppliers.’

Most PNG businesses have built ‘very good credit records in the past’, he said, so overseas suppliers are prepared to be patient.

‘They can continue with their operations but they miss out on many opportunities. Also, many businesses are multinationals.

‘Businesses are spending a lot of time trying to find foreign exchange.’

‘Being foreign companies, they would like to take at least part of their profits back home. They are not able to do this. This causes frustration.’

Schroder said businesses are spending a lot of time trying to find foreign exchange. Any cost is ‘passed on to consumers.’

BA 3


Australia-PNG Business Council
16th May 2017

PRIME MINISTER Peter O’Neill during his address at opening of the Australian-PNG Business Council in Port Moresby said it was important PNG and Australia continued its long-standing relationship, especially the bilateral trade relations between them.

He said in the past few years both countries faced challenging times whilst working to manage the impacts of the current downturn in the global economy described his government in making tough decisions to address the issue.

“We identified ways and deferred non-priority items. We also reformed many practises, both in government and SOE to manage our economy during the course of the global economic downturn,” He said.

Despite the current economic situation faced by Papua New Guinea, the national government continued its commitment through the delivery of essential government services and also the completion of vital national projects nationwide.


“The theme of this forum ‘navigating the cycle and creating opportunities in challenging times’ is relevant for both countries. But in Papua New Guinea, the lessons of the recent drop in commodity price should deliver some tough lessons for us to learn from.”

Mr O’Neill compared PNG’s economy to many parts in Australia that have always been held at ransom by the ‘boom and bust cycle’ in the resource sector.

Despite the unfriendly economic climate, the national government was on task in helping to reshape the economy whilst broadening its economic base.

He said we needed to manage our economy and move away from the ‘boom and bust cycle’ since we could not afford to rely on the resource sector forever.

“At the height of the boom energy prices, our government received revenue over K2 billion per annum. However at the bust in energy prices our revenue declined to a mere K200 million per annum,” Mr O’Neill said.

National Alliance withdrawal is Expected – O’Neill

By: PNGloop – 17th May 2017

Prime Minister Peter O’Neill has welcomed the decision by the Parliamentary Wing of the National Alliance party to withdraw from the Government in the lead-up to elections

“The decision has been expected for some time, and the party continuing in the Government would have been hypocritical considering recent outbursts by some members,” the Prime Minister said.

“We thank them for their support over the past five years and their commitment to the policies and economic decisions of the Government.
“The policies of the PNC-led Government are the policies that NA members voted for and supported in Parliament.

“Their actions and comments during the course of this election campaign clearly reflect their current mind-set, where political convenience is being placed ahead of national interest.”
The PM says the people of this nation want to hear genuine and honest policy debate.
“So while some candidates might be tempted to now attack the same policies they once passionately supported, in doing so they are only harming their own credibility.