Pride more than anything else is killing PNG's Economy

By Busa Jeremiah Wenogo

While commentators and Economists alike in recent times have been ringing the warning bells over the reports of the Mid Year Fiscal Economic Fiscal Outlook being recently released, very little has been said in describing the government's spending behaviour. The government in its part has also tried its best to save face by trying to settle the nerves of the public. Its Finance Minister has been adamant ever since the red lights came on. The Opposition has been on the attack ever since the government undertook a decision to take out a massive loan with the EXXIM Bank of China and then the infamous UBS Loan. The fact that the government will introduce a supplementary budget this year indicates that the economy is well and truly "under stress" and some "belt tightening will have to take place". Within the government circles Departments and agencies have been asked to slash back funding from their "development budget" as a "savings measure".

The problem with PNG's Economy right now is that it is in danger of "sinking" because of "pride".

The increase in expenditure (which I suspect has already push the "GDP-debt ratio" beyond the required ceiling in the Fiscal Responsibility Act contrary to media reports and statements from Treasury) has now surpassed historical spending figures since independence.

This has all come about because we have decided to play "big men" politics nationally, regionally and globally.

A downturn in commodity prices and other factors are now being blamed for this huge gap between expenditure (actual) and revenue (projected) however, we must never forget the fact that we have spent well beyond what we could have.

Is it mismanagement of the economy? Yes I think so because any right thinking government knows that we are mortgaging our assets (SOEs and other assets) as collateral for the loans against future earnings that are bound to fluctuate.

While the argument will be that PNG unlike in the past has the capacity to spend to that level because of large projects like LNG and other extractive projects, the government must be mindful that much of these large investments are primarily driven by loans.

Somewhere down the line the government (today and future) will have to pay for it regardless whether we are earning income from our exports or not.

The current situation of our economy has a very real possibility of pushing our government to ramp up its effort to get the 2nd and possible 3rd LNG into production mode as soon as possible. It will also mean more exploration and development licenses will be issued for potential investors to make "its books" look good.

The danger in all of this is that it will lead to unsustainable outcomes where no proper "social mapping" and "environmental impact assessment" will be done.

Because of our reckless management of the economy to satisfy our "pride" we will be putting the lives of our people now and the future generation at risks.

In economics it is known that whenever a government plans to undertake a "fiscal expansionary budget"/deficit budget it will be very difficult to reign in the expenditures when the popularity of the government sours as a result of increase economic activities and general improvement in the well-being of the population in terms of employment and income generation.

The current government has basically done that in its commitment to host regional and global events while churning out large chunk of money to Port Moresby at the expense of the rest of PNG.

In order to get our economy back on track the government will have to "humble" itself. Furthermore, it needs to grasp the reality facing most of our Papua New Guineans rather than working on a "default" mode assuming that all be OK.

No it will not so long as we "beat our chest" in "pride". Too much of our "pride" has already brought our economy to its knees. What is happening to Ok Tedi could be an indication that we have done so much harm than good to our own economy and people that it is now time to change our approach.

Inorder to get our economy back on the track the government will have to "humble" itself. Furthermore, it needs to grasps the reality facing most of our Papua New Guineans rather than working on a "default" mode assuming that all be ok. No it will not so long as we "beat our chest" in "pride". Too much of our "pride" has already brought our economy to its knees. What is happening to OK TEDI could be an indication that we have done so much harm than good to our own economy and people that it is now time to change our approach.