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Monday, July 02, 2012

World Bank: PNG must spend better

By MALUM NALU

THE passing of the boom in PNG government revenues will challenge authorities in the coming years, according to the World Bank, The National reports.
 This is according to its latest PNG Economic Briefing The Challenge of Transforming Today’s Boom Into Better Living Standards for Tomorrow,  which was presented by World Bank country economist Tim Bulman at the monthly economic and public sector programme seminar at the Holiday Inn last Friday.
Tim Bulman


The report said meeting the community’s expectations of improving services would require “spending better as much as spending more.
Important policy steps are being taken in this direction, but the pressures to meet short-term demands, and PNG’s social needs, are great”.
“Before the revenues from the LNG and the potential additional projects start flowing late this decade, government revenues are expected to stagnate, especially relative to rising costs of skilled employees, and of materials and the demands of a population growing by around 2% each year,” it said.
“At the same time, the community will continue to expect the government to provide more and better services, towards benefitting from the boom occurring in parts of the economy.”
The report said to manage these opposing pressures, it would be essential for the government to better ensure that spending from the government was translated into education, health and other services delivered to the end user with fewer leakages en route, or that investments in infrastructure were appropriately maintained.
“This will require both better planning and implementation,” it said.
“The establishment of the sovereign wealth fund and the government’s move towards multi-year budgets for capital projects are steps in this direction.
“More effective, especially in the short term, will be reducing leakages.
“Strong institutions of governance, throughout the public sector, and developing a pervasive culture of accountability can help achieve this.”
The report said translating economic wealth of the scale enjoyed by PNG into better living conditions for all citizens was a great challenge.
“Some countries have successfully managed the challenge of the ‘resource curse’,” it added.
“Already, PNG has created a climate that attracts investment in its resource production, and it is developing the institutions to ensure that this wealth supports a stable macro-economy.
“For long-term development and prosperity, it will be essential to design PNG institutions that ensure political leaders have the incentives to turn the nation’s wealth into long-term, broad-based development, rather than maximising the potential for it to generate short-term private rents.
“Failure to do this may undermine the gains of the past decade and the potential ongoing boom, working its way through the project planning and preparation pipeline.”
The report said Standard & Poor’s warned of this risk in February this year when it shifted the outlook for the country’s long-term sovereign debt from stable to negative.
“The challenge will be for the leadership that emerges from the mid-year elections to replicate these efforts in the public realm,” it said.

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