The FINANCIAL — Papua New Guinea (PNG), the Pacific subregion’s largest economy, faces tough challenges in pursuing effective economic management while maintaining public spending for the delivery of basic social services, says a new Asian Development Bank (ADB) report launched on July 14.
ADB’s Pacific Department biannual economic report; the Pacific Economic Monitor says economic growth in PNG will reach 4.3% in 2016, slowing to 2.4% in 2017.
“Budgets should move toward allocations based on performance and greater reporting of expenditures is recommended,” said Marcelo Minc, Country Director of ADB’s Papua New Guinea Resident Mission. “Budget formulation needs to become more focused on delivering results.”
Although the medium-term outlook for PNG’s economy plans for modest increases in revenue and expenditure until 2020, forward revenue projections may not be realistic. Without further fiscal consolidation, PNG is likely to miss its fiscal targets, the report says. Inflation is seen unchanged at 6.5% in 2016 and will remain at that level in 2017 due to higher costs of food and health care, according to ADB.
Improving infrastructure and enabling private sector participation remains central to achieving broad-based, inclusive and sustainable economic growth. For instance increasing export competitiveness in the fisheries sector could help expand jobs.
PNG joined ADB in 1971. It is ADB’s largest partner in the Pacific in terms of loans for public and private sector development.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.