Government should reduce spending/borrowing.

Governor of the Bank of Papua New Guinea Mr. Loi M Bakani says the country’s economy is still strong.

He said this during a press conference, after the release of the Mid-Year Economic and Fiscal Outlook Report 2015 and after several misleading, inaccurate and wrong publications in both the formal and social media recently on the state of the country’s economy specifically the 2015 budget.

He said it is clear that as a result of the sharp decline of most commodity prices, especially oil and gas, copper, gold, nickel and some agricultural export the expected revenue flows into the budget are on a sharp declining trend. And this will have an impact on tax receipts from the resource sector and other sectors affected by it.

He added that the Economic and Fiscal Outlook 2015 report summarized that the Government expenditure and revenue are below the budgeted level and based on the present estimates, GDP is expected to grow by 11.0% in 2015 and at the end of 2015 to be around K52 billion.

Based on this the maximum planned deficit as per the budget of 4.4% of GDP should not exceed K2.3 billion.

He added that to maintain the level of debt within the Fiscal Responsibility Act of 35%, Government borrowing should not exceed K18.4 billion.

The only protected areas from reductions in expenditure will be the appropriations to the priority areas of Health, Education, Law and Order, Economic Development especially Agriculture, and Critical Infrastructure. He said all other expenditure areas will be revisited and adjusted to the new realities that the country is facing.

In regards to the foreign exchange he said the level of foreign exchange reserves is at US $2.0 billion with 7 months of total imports and 10 months of non-mining imports.

The Governor says that he is confident that the Government will make the necessary adjustments to the 2015 budget, implement them and present them in a 2015 Supplementary Budget in the October/November session of Parliament for approval.