Wednesday, December 30, 2009

A balanced Papua New Guinea budget for 2010?


The PNG government claims it will have a balanced budget next year. The opposition party has further highlighted many key areas the government has missed out, or given low priority to in its 2010 Money Plan.

Many sectors are also complaining our next years' budget is far from being a balanced budget. What is a balanced budget anyway? Assessing any government budget will always been a subjective assessment.

Every government will always claim they have a balanced budget. There is no such thing as a balanced budget as many critics will always pick holes in any budget. They will always find many needy areas that the government has missed out on when drawing up its budget plan.

In future, the government must substantially do more other than say it has a balanced budget. Many priority areas are underfunded from previous years. There are important fundamental areas a budget must always cover are missed for a whole range of reasons. Successive governments have done this, even the opposition now picking holes in next year’s budget.

In addition, I suggest our government must do some required readjustments in 2010. It must complement any good budget by ensuring to put in place some effective mechanisms to achieve good financial management and accountability.

For many years, I see one great barrier that has prevented successive PNG Governments from addressing the real world issues of job creation, urban migration, health care and education, and that is our country's weak; and fragile fiscal position. In 2010, the government can increase PNG's revenue stream through developing new business opportunities in industry and other targeted government investment.

In addition, the government must do more than increased revenues. It should first of all put PNG's 'Fiscal House' in order that will always require sound fiscal management of government's current expenses. Its fiscal policies should be aimed to keep a tight rein on government spending, and refocus new spending to key priority areas that will boost sustainable economic growth.

The government must also provide real financial management, real transparency and real accountability. A new approach must now be found to stabilize the government's fiscal position.

I suggest next year, our government should try some future strategies like keeping real program expenditures constant by limiting the annual growth in spending to the anticipated growth in inflation. Any new needs that arise must be reasonably accommodated within this budget constraint.

The government must also ensure value for money by eliminating ineffective and inefficient programs. To do this, it should set objectives for program spending and tracking results. Another financial strategy is stopping the practice of year-end spending to use up unspent budgetary allocations, and assign any unanticipated budget surplus to debt reduction. So by reviewing financing arrangements to service the country's debt, the government can also immediately review all financing arrangements in all departments to cut the country’s debt; and reduce interest cost.

For many years now, governments spend up to some eighty per cent of its budget towards salaries and employee benefits. In the next five to ten years it must use this period to rationalize the workforce by reducing the size of its public sector workforce through rationalization strategies like: natural attrition, retraining for redeploying into the private sector.

Another good future strategy is to conduct a review of all government vehicle fleet and determine how many are necessary for government operations and downsize accordingly. Thus, by doing a further cost benefit study; it will be able to accurately determine whether these vehicles should be purchased or leased. All travel expenditures for elected and non-elected officials must also be reviewed and reduced.

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