‘Bold’ 2013 Budget brings more risks

Source: The National, Thursday 06th December, 2012

By MALUM NALU

THE 2013 Budget is a “bold” attempt to improve service delivery at the provincial and district level, according to Asian Development Bank’s PNG country economist Aaron Batten.

Batten, speaking at ADB’s PNG year-in-review at the Grand Papua Hotel in Port Moresby, said this “boldness” brought increased risks, including:

·         Emergence of structural deficit, and unrealistic recurrent expenditure constraint required for a return to surplus; and

·          Capacity of govern­ment to implement scaled-up sub-national funding pipeline.

“The role of ADB, and development partners, is to partner with government to implement their ambitious objectives,” he said.

Batten said the 2013 Budget was framed against a slowing economy, and falling copper and oil exports, resulting in a tightening revenue scenario.

“LNG will help alleviate these pressures, but not for some time, while expenditures grow at a record pace, resulting in a sharp deterioration in the budget balance,” he said.

“Public debt will likely remain relatively moderate by historical standards, but without expenditure restraint, debt will begin to push up against ‘sustainable’ limits.

“Medium-term challenge is whether expenditure gap can be closed.

“Major challenge will be achieving the targets set for the recurrent budget, creating significant downside risks for the ‘return to surplus’.

“New spending is focused on priority sectors (education, health, infrastructure, law-and-order), with majority of ‘new expenditure’ allocated to sub-national government, which will amplify pressure on provincial expenditure systems that have historically struggled to fully implement their funding.”

Meanwhile, ADB’s partnership with PNG has grown in recent years with a significant pipeline of new investments planned for 2013-15, according to country director of Port Moresby resident mission Marcelo Minc.

These focus in particular on transport infrastructure including US$199 million Lae port development;  US$157 million highlands region road improvement with a further US$120 million slated for 2013-15;  US$88 million on rural bridge replacements;  and US$73 million civil aviation development investment programme with a further US$230 million for 2013-15.

“ADB increasingly delegates implementation of projects to PNRM (Port Moresby Resident Mission), which helped to improve the pace of project implementation and the speed of loan disbursements,” Minc said.

Minc said ADB:

•    Continues to strengthen partnership with PNG, ensuring projects are relevant and high impact;

•    Strengthens infrastructure investments by also providing knowledge and leveraging co-financing from donor partners and/or private sector; and

•    Focuses on strong implementation to maximise the  inclusiveness of growth and service delivery.