Papua New Guinea Treasurer Patrick Pruaitch (clutching folders) listens to Prime Minister Peter O'Neill (pointing finger) in parliament. Photo: RNZI / Johnny Blades
Papua New Guinea's parliament has passed a supplementary budget of 287 million US dollars amid a significantly tightened fiscal position.
The supplementary budget was passed after the government took stock of what the Treasurer, Patrick Pruaitch, called a tough half year for many economies.
Mr Pruaitch told parliament that 200-million dollars was retained from capital investments, while over 86-million dollars was cut from unissued operational allocations from various government agencies.
He noted that the drop in global prices for key PNG commodity exports such as oil was a central factor in the need for the supplementary budget.
Treasury's 2016 PNG Mid-year Economic and Fiscal Outlook showed a collapse in revenue for a second consecutive year.
The Treasurer told the parliament sitting that the government has decided to make the required adjustments to ensure that its planned deficit remained at the budgeted level of 650-million US dollars or 3.8 per cent of GDP.
Mr Pruaitch said the national government must remain cautious as the pace of recovery in the global economy remains slow and steady.
On the state of the economy, the Treasurer said notable sectors where growth has stalled were mining and quarrying, the manufacturing sector, and the wholesale and retail trade sectors.
"Growth projections in these particular sectors have been revised down and it is hoped that the uptake in the second half of the year will slightly improve to complement modest economic growth in the agriculture, fishery and forestry sector," he said.
Projecting an easing in the strain in the second half of 2016, Mr Pruaitch said foreign currency backlog would start to clear after the return to operations by the OK Tedi Mine in March of this year and the drawdown of the Credit Suisse first tranche of US$200 million syndicated loan facility in early August.
Inflation in 2016 was expected to be 6.6 per cent, higher than the 2016 Budget estimate of 5.7 per cent.
"The increase accounts for the higher than expected 2015 inflation outcome of 6.0 per cent, the gradual depreciation of Kina against our major trading currencies and the anticipation of a gradual recovery in commodity prices, especially the crude oil."
Several corrective measures which the government introduced in the 2016 Budget would be continued into 2017.
These include measures to expenditure side such as amalgamation of departments and agencies, freezes on recruitment, and addressing personnel costs.
