Wednesday, March 14, 2012

Expert: No big LNG kina until 2023


Earnings from the LNG project are not expected to be significant until after 2023, according to Asian Development Bank’s Papua New Guinea country economist, Aaron Batten.
He told The National yesterday, after release of the latest edition of ADB’s Pacific Economic Monitor, that this had to do with financing agreements of the project.
“For the first five to 10 years of LNG production, revenues will be quite small,” Batten said.
“This has to do with financing agreements of the project.
“This is accelerated depreciation (to do with tax benefits to the project).
“LNG revenues for the first five to 10 years of the project will only replace the decline in other mineral revenues government receives.
“In the long term, things will get better, but over the medium term, government will face a growing fiscal challenge.”
Batten said government must ensure that enough funding was allocated to key service delivery priorities like health, education and infrastructure.
“At one level, this will require an increasing prioritisation of these areas (health, education and infrastructure) within the budget,” he said.
“It will also require them to manage public expectations for improved service delivery as a result of LNG revenues, which are not expected to be large until after 2023.”
Batten said the major challenge facing the government right now was the declining government revenue over the next two to three years, mainly because of winding down of LNG construction, declining output from mines and oil fields, and agriculture exporters to face loss of competitiveness as a result of the high Kina exchange rate.
He said there would also be many new expenditure commitments such as free education, free health as well as one-off costs to do with the elections and LNG.
“This must be balanced, given the tighter financial situation,” Batten said.
He said the last 10 years had been very positive for employment creation, with economic growth creating many new job opportunities, however, government could do more to create more job opportunities.

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