2006 Budget Commentary

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Port Moresby Chamber of Commerce and Delloitte
Touche Thomatsu 2005 Budget Commentary Michael
Manning Institute of National Affairs
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Theme Improving Peoples Lives through Strong
Economic Leadership Linking two
concepts Strong Economic Leadership since
2002 And Improving peoples lives WITHOUT
compromising macroeconomic stability
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Guiding principles Framework Government will
live within its means by producing a budget that
is affordable and sustainable Government will
not add to debt in the medium term Budgetary
Expenditures will be consistent with agreed
national and sectoral priorities Government will
link its participation to core areas where there
is a clear rationale for public
intervention Government will provide a
regulatory framework that encourages and supports
the private sector
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Guiding principles (2) Implementation Government
will exercise tight fiscal controls by closely
monitoring all expenditures and by enhancing
revenue collection Budget plans will be adhered
to and departments will be held responsible and
accountable for managing their allocated
expenditures Government will ensure that any
mid-year proposals outside the budgetary process
will be required to identify funding options and
compensating savings within the
department/agency Government will work towards
increasing the transparency of public finances by
releasing timely budget information.
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SOURCE Bart Philemon, Economic and Development
Policies Department of Treasury 2004, 2005
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SOURCE Bart Philemon, Economic and Development
Policies Department of Treasury 2005, World
Bank East Asia Update November 2005
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Budget Assumptions
Source Department of Treasury Economic and
Development Policies Port Moresby 2004, 2005
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2006 Budget Summary
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Source Bank of Papua New Guinea Quarterly
Economic Bulletin, June 2005, Department of
Treasury, 2006 budget
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Source Department of Treasury Economic and
Development Policies Vol 1 Port Moresby 2005
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• Tax revenue is expected to decline in 2006 by K45
  M (1.3) to K3, 447.6 m. due to
• Taxes on income and profits down K62m.
• because of reforms in personal taxation,
  increased thresholds and abolition of double tax
  on dividends.
• Decline in mineral and oil prices from historic
  levels
• Continued phasing down of the mining levy
• Domestic Taxes on goods and services to increase
  marginally by K31m. to K700.4m.
• Taxes on international trade are expected to
  decline by K14.1 m. to K278m.
• Non Tax revenue is expected to decline by K1.7
  million with falls in
• Property income (K5.4m), Non mining dividends
  (-K17m.) and interest fees from lending (-K1.2),
  increases in mining and petroleum dividends
  (K11.6m.) and Other non-tax revenue

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Infrastructure Tax Credits expected to increase
by K21 m. in 2006 due to better utilization of
the scheme by mining and petroleum companies and
an increase in the allowance for agricultural
companies to 1.5 of assessable income. Project
Support Grants are expected to decrease by K289
m. mainly due to the withdrawal of the ECP and
completion of two Japanese aid projects.
Increased project aid is expected from the
European Union (K28m.), China (up K43.2m from a
small level in 2005) and New Zealand (up 57.3 to
K36.5m.)
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Priority Areas In 2006 around K390 million in
recurrent funding has been allocated to law and
order. The police budget has been increased to
around K150 million, a 20 per cent increase on
2005. Around K490 million has been allocated for
basic education, with a substantial increase in
spending on primary education, including for
additional teachers. A total of K370 million has
been allocated in the recurrent budget for health
expenditure, with K125 million provided to the
Health department, including funding for medical
supplies of K63 million, and K161 million for
hospitals and church health services. Health
funding is also provided for provincial health
workers and function grants.
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The Development Budget The 2006 Development
Budget is K1687 million, marginally down from K1,
859 million in 2005 and is spread between
General Governmental Affairs 482 m. ECP
116 Community and Social Affairs 308
m. National AIDS Council 32 Education
Development 24 Curriculum Reform 25 Economic
Affairs 734 m. Highlands Highway 103 Other
National Roads 146 DRIP 35.6 Lae
Wharf 15 Maritime Infrastructure 66.2 Provincial
Impact Projects 15 Agricultural
Research 15 Multi Functional Expenditure 162 m.
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