2016: Supporting economic growth through fiscal discipline

The theme of the 2016 National Budget is “Supporting Economic Growth through Fiscal Discipline” and is set at K14,762.6 million against projected revenue of K12,650.1 million.

The 2016 Budget is expected to result in a net borrowing position of 3.8 per cent of GDP and a debt-to-GDP ratio of 35.8 per cent in 2016. The level of net borrowing is projected to gradually reduce, to reach a surplus in 2020.

The Budget is set within the Government’s overarching development frameworks, including the Vision 2050, the Development Strategic Plan 2030, Medium Term Fiscal Strategy (MTFS) and Medium Term Development Plan II. It has been framed amidst a weak global economy and slower economic growth that has been constrained by the current El Nino drought and low commodity prices.

Key components of the 2016 Budget include:

• A reduction in spending of K613.4 million from the 2015 revised budget, however key Government priorities (eg. education and health) will not be affected.
• The PNG economy is projected to grow at 4.3 per cent in 2016 driven by a rebound in the mining and non-mining sectors.
• Inflation is expected to increase to around 5.7 per cent, reflective of the expected improvement in the global economy and the pickup in commodity prices.
• PNG’s current account balance has recorded a significant surplus of K7,154 million in the first half of 2015 compared to a deficit of K518.0 million recorded over the same period in 2014.
• In 2016, Total Revenue is projected at K12,650.1 million, K12.2 million above the 2015 Supplementary Budget estimate.
• Total expenditure in 2016 is estimated to be K14,762.6 million, a reduction of K367.2 million, or 2.4 per cent from the 2015 Supplementary Budget of K15,129.7 million.
• In 2016, the current account balance is expected to be a surplus of K15,955 million or 28.9 per cent of GDP compared to an estimated surplus of K14,665.7 million or 28.7 per cent of GDP in 2015.
• The 2016 Budget includes a potentially significant amendment from a taxation viewpoint – the introduction of a facility for an Import GST deferral scheme – a measure PwC has been suggesting for several years. There are also a number of technical amendments to the tax legislation.