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PNG Economic Survey 2007: Addressing Fiscal Discipline for Sustainable Growth

Explore the impact of fiscal discipline on PNG's economy in 2007, with insights on government successes, challenges, inflation rates, public debt, and growth obstacles. Analyze macro and micro factors influencing economic performance.

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PNG Economic Survey 2007: Addressing Fiscal Discipline for Sustainable Growth

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  1. PNG Economic Survey 2007: Fiscal Discipline Needed Roderick Duncan Charles Sturt University

  2. The macro story • Successes of the Somare government • Inflation down to 4-6% range (from 10-16% range) • Public debt down to 43% of GDP (from 72% of GDP)

  3. Inflation

  4. Public debt

  5. The macro story • Troubles • Spending and the budget deficit (running a deficit during a boom) • Poor growth in per capita terms

  6. Government spending

  7. Real GDP growth?

  8. Manning (1999)- formal sector 1. crime and theft 2. corruption 3. poor infrastructure 4. policy instability 5. inflation 6. taxes and regulation Eugenio (2001)- informal sector 1. lack of access to finance 2. lack of infrastructure support 3. impeding regulations 4. lack of business skills The micro story- obstacles

  9. Why doesn’t PNG grow?

  10. A “perfect storm” of misappropriation • New spending outside the usual 2006 and 2007 Budgets. • 2006 Supplementary Budget- K682.5 million • 2006 Windfall Gains- K650 million • 2007 Windfall Gains- K450 million • 2007 Supplementary Budget- K700 million • Net new spending K2,382.5 million

  11. Should we be worried? • 1. An election this year • 2. Unpopular incumbents (75% of incumbents were thrown out in 2002) • 3. Large amounts of undirected cash outside the standard budgetary channels

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