Tuesday, August 02, 2011

Treasurer prepares K606 million additional budget


TREASURY and Finance Minister Patrick Pruaitch is expected to hand down a supplementary budget of K606.8 million against a backdrop of stronger  economic growth and high revenue for this year, The National reports.
He said PNG's economy was expected to grow by 9.3% this year, higher than the forecast 8%.
He said growth in the non-mining sector was expected to hit 10.2% –  well above world averages.
Pruaitch revealed the projected additional surplus budget when releasing the Mid-Year Economic and Fiscal Outlook report for 2011 yesterday.
He said the total revenue and grants for 2011 were estimated at K9,935 million while total expenditure and net lending should be about K9,328.2 million as appropriated in the 2011 Budget. 
He said this gave a projected surplus of K606.8 million.
"The projected K606.8 million surplus is entirely a result of increased revenue projections, driven largely by higher personal income tax collections than expected, higher commodity prices and higher mineral revenue."
Pruaitch said no over-spending or under-spending were projected saying a supplementary budget was expected later in 2011.
He said the projected additional revenue could be allocated to high- priority expenditures in the key areas of health, education, infrastructure and law and justice.
He said there were also obligations to consider such as the PNG LNG-related commitments and the 2012 national election preparations.
He said this was driven by higher levels of economic activity in the non-mining sector and the construction of the PNG LNG pro­ject.
"If this positive growth rate eventuates, the economic output in PNG will have ex­panded for more than a decade, representing the longest period of uninterrupted eco­nomic growth in PNG's history."
He said the strength of the economy was reflective of stronger investor and consumer confidence following sustained macro-economic and fiscal stability as well as critical microeconomic reforms.
Pruaitch  said although the global eco­nomic recovery was expected to continue in the remainder of 2011, significant down­ward risks remained.
He said the risks included the European sovereign debt concerns, fiscal and financial imbalances in other advanced economies, and the effect of the Japanese earthquake and tsunami on industrial production.
He said that emerging and developing economies were growing strongly although economic overheating was becoming a concern.
He said prices of PNG's major export commodities continued to climb, following strong demand from emerging and deve­loping economies and supply shocks.
"The prices of PNG's major mineral exports of gold, copper and oil have risen well above the 2011 Budget forecasts, and are expected to remain at elevated levels through the remainder of 2011.
"As a result, the price assumptions have been revised upwards for the MYEFO report, recording more than 20% for oil and 25% for gold and copper, compared to the price assumptions used in the 2011 budget.
"This has resulted in higher projected government revenue in 2011."
Pruaitch said rapid economic growth was now a major concern in PNG as it had a direct impact on inflation. 
He said annual inflation was now forecast to be 9% in 2011, an upward revision from 2011 Budget forecast of 8.2%.
"This is largely due to the high level of economic growth, a continuing shortage of skilled labor and land which underpinned wages and rental prices, and higher food and fuel prices from high global demand."
He said the appreciation of the kina since the start of the year had partially off-set the acceleration in these inflationary pressures. 
"However, there is also a concern that official inflation figures are under­esti­mating the true extent of inflationary pressures in the economy."

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