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Oil prices hurting PNG economy

Staff Reporter | 4:18 PM | |
PNG TREASURER Patrick Pruaitch says the big fall in oil prices is taking a toll on the PNG economy despite government revenues rising to a record level last year.
Pruaitch (pictured) said the 2014 Final Budget Outcome (Provisional) released last month by that Treasury Department showed that the  total government deficit increased to K2.99 billion compared with a projected deficit of K2.35 billion in the 2014 budget.
Total revenue and grants had risen to K11.5 billion compared with the final budget outcome of K9.83 billion in 2013 but lower than the K12.69 billion forecast in the original 2014 budget, he said. “While these figures reflect a generally healthy economy that is enjoying considerable growth we have to take stock and proceed cautiously because global economic conditions and the fall in commodity prices is likely to reduce government revenues this year,” Pruaitch said in a statement yesterday.
“One of the clear signs of the increased resilience of the PNG economy was shown by the fact that personal income tax collections in 2014 had risen to a record K3.2 billion despite the big fall in employment following completion of the PNG LNG Project.
“Besides reflecting a more diversified national economy much credit needs to go to the Internal Revenue Commission for its success in raising additional tax revenues and in widening its tax compliance initiatives.”
The Final Budget Outcome showed personal income tax collections last year was K3.2 billion compared with the estimate of K2.85 billion and actual 2013 personal tax receipt of K2.8 billion.
Other taxes were largely down compared with the 2014 budget estimate, including company tax (K2.5 billion), mining and petroleum tax (K794 million), goods and services tax (K1.04 billion) and non-tax revenue (K900.9 million).
Total National Government expenditures was K14.5 billion in 2014, a rise of K1.98 billion from actual 2013 expenditure of K12.5 billion and lower than the original 2014 budget estimate of K15.04 billion.
Government spending included the 2014 Supplementary Budget commitments for Lae and Port Moresby city roads, Pacific Games and the PNG Power supply policy. Expenditure for national departments hit K7.26 billion, up from K6.49 billion in 2013, and provincial governments K3.5 billion, up from K2.8 billion in 2013.
The K2.99 billion budget deficit was funded by new domestic borrowing of K8.7 billion, up from K6.9 billion in 2013, and external borrowing of K610 million, up from K516.5 million in 2013.
Total public debt outstanding rose to K15.37 billion last year compared with K11.88 billion in 2013, causing the public debt to gross domestic product ratio to increase from 34.6 per cent to 37.7 per cent.
Pruaitch said the National Government needed to proceed with caution in the months ahead in view of likely reductions in revenue this year.