Interview: Ian Ling-Stuckey
With the country’s economy following a boom-bust cycle, what policies could be used to hedge against a downturn, especially amid the Covid-19 pandemic?
IAN LING-STUCKEY: I would argue that Papua New Guinea is not a boom-bust economy. While our vital resources sector does experience major swings, this segment accounted for less than one-fifth of the economy from 1980 to 2018. Most sectors of PNG’s economy – that is, the non-resource segments – have a sustainable base and huge upside growth potential. Fiscal initiatives are also effective tools that hedge against downturns. Prior to the pandemic, PNG already had the largest fiscal stimulus in its history as part of the 2020 budget. When the government made the Covid-19 stimulus package, it allocated only 10% of the funding to specific increases in expenditure to cushion the blow of the crisis. The remainder of the package focused on other tools, such as monetary policy, and support to businesses and households. These pandemic-related expenditures will be fully offset by budget cuts elsewhere.
Which global partnerships is PNG pursuing for concessional loans and sustainable development?
LING-STUCKEY: After a period of unsuccessful collaboration with international development partners, Prime Minister James Marape’s administration is working constructively to build on our grant aid assistance, primarily from Australia, reduce reckless and expensive commercial borrowings, and move towards more sustainable, cost-effective international financing.
Global partnerships have been important sources of funding during the pandemic. In the first half of 2020 we received interest-free loans from the IMF, and low-cost financing from Australia and other bilateral partners. Building on our relationship with the Asian Development Bank and the World Bank, we are exploring membership of the Asian Infrastructure Investment Bank, as well as the possibility of accessing funding from the Australian Infrastructure Investment Facility.
How can PNG strike a balance between generating more public revenue from resource wealth, while remaining attractive to private investment?
LING-STUCKEY: As former minister for mining, I appreciate the resource sector’s contribution to PNG’s economy and the importance of striking the right balance between risk and reward. The sector’s contributions to the nation’s finances have dropped significantly in recent years, and the best international advice we receive on the matter is that PNG has a resource tax regime that is low by international standards. Given PNG’s development challenges, it is reasonable to move towards international standards of benefit-sharing.
What is the strategy for increasing transparency and accountability in public finances?
LING-STUCKEY: Upon taking office in August 2019 I arranged for a due diligence analysis backed by the IMF to identify shortcomings in the previous national budget. The government has entered into a historic programme with the IMF to implement a transparent budget reform. These changes were made to assure the international community of the level of transparency in the economy, as this enables detailed international scrutiny of public accounts and state agency finances.
Where have you identified underutilised sources of state income, and what can be done to better capitalise on these sources?
LING-STUCKEY: Revenue collection has long been a challenge. Rather than introducing new taxes to boost revenues, the government is working to increase compliance and restore equity. To this end, a new internal revenue commissioner has been appointed and we are working to elevate compliance levels. It is estimated that at least PGK2.8bn ($825m) in taxes was lost in 2019 due to compliance shortfalls beginning in 2014. It is evident that the country does not need new taxes on the non-resource economy, but better compliance.
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