2010 Budget Reply by the Opposition

2010 BUDGET REPLY

Tuesday, 24 November 2009

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Budget: a fast money scheme and an inflation time bomb
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BART PHILEMON, MP
Deputy Opposition Leader
Spokesman for Treasury and Finance

A. INTRODUCTION

Mr Speaker,

The Opposition see the 2010 Budget as nothing more than a fast money scheme and an inflation time bomb.

And the track record of the Somare-Temu Government, particularly the Treasurer in the management of the two full Annual Budgets of 2008 and 2009, does not give us much hope for a revolutionary change in this budget.

In fact, many of us, having observed the outcomes and trends, are suspicious and worried that again we will be deceived, disappointed and disturbed by the final outcome of the 2010 Budget.
The purpose of any annual budget is to create wealth and reduce poverty for Papua New Guinea. However in budget after budget much of PNG’s population has been forgotten in the process of development. This has happened for decades even in periods of favourable economic growth. Both delivery of infrastructure maintenance and basic social services, despite huge volumes of money, have failed to keep pace with population growth.

Why make critical comments on what so far has happened? The reason is simple: if we do not reflect on what has happened, we are likely to repeat the same practice again and again. And the service that we need to provide to our people across PNG will always remain dreams and not reality.

We all must be interested in improved service outcomes.
* We want to see healthcare and a healthier population,
* improved schooling and quality educational attainment for our children,
* a road network that is regularly maintained enabling a smooth flow of people and goods to markets, and
* a developing agriculture and tourism sector that generates income for the bulk of our people to improve their standard of living.

B. ASSESSMENT OF 2008 BUDGET PERFORMANCE

Mr Speaker, in order to make full assessment of 2010 Budget one must look at the Final Budget Outcomes for 2008 and the performance to date of 2009 as the foundation for structuring the 2010 Budget.

This Government’s first full Budget after the 2007 National Elections was 2008 Annual Budget. That budget was completely mismanaged. When it was presented, the Parliament was told by the Treasurer that they were planning for a surplus budget of K202.4 million.
In November 2008, the Government revised the budget by adding K598.8 million to the revenue and K790.7 million to the expenditure. The expectation was for the final budget outcome to be a small deficit of K9.5 million.

In actuality, the deficit was K478.5 million – which was K680.9 million worse off than the originally planned surplus of K202.4 million.

Mr Speaker, the Opposition – and I am sure – many Papua New Guineans are still mystified by how a K850 million supplementary budget could be handed down and co-exist in the same financial year in which we hit a annual budget deficit of K478.5 million.

Papua New Guinea’s economy has performed exceptionally well since 2003. Our country has seen unprecedented macroeconomic stability and growth and, more importantly, stood the test of the global financial meltdown.

C. ASSESSMENT OF 2009 BUDGET PERFORMANCE

This impressive performance has been brought about by high prices for most of our export commodities, coupled with strong and prudent management of pre-2008 Budgets.
However, all the positive economic developments are now at great risk, due largely to a breakdown in fiscal discipline and lack of prudent macroeconomic management, which started when the National Alliance-led Government took office after the 2007 elections.
The PNG economy is now suffering from inflationary pressure fuelled by excessive spending by the Government and subsequent financing of the 2008 Budget deficit of K478.5 million through the domestic market.

The inflation rate peaked at a record 13.2 per cent in 2008 but has been well contained by the Central Bank through the tightening of its monetary policy. The current rate is 7.0 per cent but this could jump to 15 per cent by the end of the year if the Government continues to draw down on trust accounts and if the kina continues to depreciate against the Australian dollar.

*** It is 25-pages long. If you need a copy, email me.