Treasurer Ian Ling-Stuckey presented the government’s Covid-19 economic response package on spending last Friday. The theme was: “Protect the budget, protect the economy”. Below is a summary of the Treasurer’s spending presentation primarily for small businesses and the private sector.
On April 2 last year, the government presented an innovative and inclusive economic response to support the country’s war against the coronavirus (Covid-19) pandemic.
Further improvements were described on June 3, bringing the planned size from K 5.6 billion to K 5.7 billion.
Context of the $ 5.7 billion economic response
I want to highlight important factors in the way we have acted to protect people, protect the budget and protect the economy.
The first was the importance of responsible budgeting.
As I made clear on April 2 last year, our direct budgetary response had to be prudent and responsible.
It was produced in extremely uncertain times.
Global growth had been reduced to its lowest level since the Great Depression a century ago.
The world economy has fallen by 38 trillion K (or 38 trillion K) – that’s 420 PNG economies wiped out!
Dow Jones, the US stock index has fallen 25 percent in two months, losing 7 trillion kinas and dragging the rest of the world with it.
At one point, oil prices turned negative.
Our response therefore had to be flexible enough as the nature of the pandemic changed and as we learned more.
Protect the budget
The two largest parts of our response were designed to protect the budget, in the face of much lower export earnings due to falling oil prices, a sharp drop in PNG’s national income compared to the 2020 budget. from K 92.2 billion to K 81.6 billion, and a sharp drop in turnover ultimately estimated at EUR 2.7 billion.
The government’s first response was the issuance of K 2.5 billion Covid bonds, to stop the bleeding in funding for the 2020 budget.
The second was to request a blood transfusion of K 1.5 billion in the form of concessional loans.
The second part, replacing the predicted loss of tax revenue, was more difficult, as it would have been wrong to simply increase taxes. We therefore sought to obtain cheap concessional financing from our international friends.
The initial objective was to raise an additional K 1.5 billion.
In the end, thanks to our prudent and responsible economic policies and the international respect they engendered, we raised 2.8 billion euros.
Much of it at zero percent interest cost. Zero percent.
A loss of revenue of K 2.7 billion currently would not lead to budget cuts of K 2.7 billion.
In total, K 5.3 billion to protect our 2020 budget and fight against the worst impacts of the pandemic.
Where have these 5.3 billion euros gone?
He went to support all the programs that were part of the 2020 budget.
Thus, rather than facing massive spending cuts, due to declining tax revenues and domestic financing, the budget has been protected.
He also went to business. If we hadn’t stopped the bleeding, there would have been massive cuts in the spending that supports our businesses.
It is unfortunate that some companies complain that they have not received direct financial assistance.
But with all due respect, let’s not forget that most of the government’s response meant that so many of their sales and contracts could go on, as the blood transfusion meant we didn’t need to cut back. the budget.
The largest component of the K501 million expenditure was direct transfers to the province and district Covid-19 trust accounts.
The total was K214.8 million consisting of:
- K1 million to each province and district to support agriculture, ensure food security and maintain nutrition levels.
This program included an awareness campaign and support for the purchase of seeds and other inputs, and the management of threats to crops and animal health;
- K 500,000 to each province and district to support Wash programs to prevent the spread of the coronavirus in communities, where poor sanitation and water supplies make people vulnerable;
- K500,000 per district for MSMEs to help sustain PNG’s small businesses and entrepreneurs during times of severe restrictions, falling commodity prices and other issues created by the Covid-19 crisis.
These funds have also helped to circulate much-needed cash in communities.
Kavieng District spent the funds this way:
- K 400,000 provided in the form of agricultural tool kits and equipment such as sickles, farm boots and fertilizers to oil palm farmers;
- 350,000 K for store supplies provided to SMEs to launch and support rural village table markets, home markets and trade stores, as well as 230,000 K for the purchase of two trucks to distribute these materials ;
- 170,000 K to our savings and loan company Niu Ailan, to provide micro-financing to local businesses, especially women;
- Donation of K33,000 to copra farmers to help them buy coconut presses and seedlings;
- 15,000 K to cocoa farmers for the creation of cocoa nurseries, plants and farms.
At the onset of the crisis early last year, the corporate sector faced growing cash flow problems. So we worked with the Bank of Papua New Guinea to get the financial sector, to keep or increase the liquidity flowing in the economy.
One element was to offer loan repayment holidays, the result of which, as reported by the central bank, was over K 1.7 billion in loans granted repayment leave.
I know these vacations were only temporary and businesses now have to repay their loans, but it gave them time to adjust to the crisis.
Likewise, the Internal Revenue Commission also delayed tax payment deadlines, which also kept more money in the system at this critical time.
The government has also worked with the pension industry to help workers access their rights sooner if they are made redundant.
The required legislative changes were passed in November of last year.
I described where the KK 5.7 billion Covid-19 response package has gone – protect the people, protect the budget, protect the economy.
Protect education and health spending, protect salaries and salary expenses, protect payments to MPs for their districts, protect businesses through ongoing contracts, and pay back arrears.
It was not about new additional spending, it was about stopping K5.3 billion in budget cuts.
That is K 5.3 billion protecting the 2020 budget and over K 400 million in new direct action programs, to help and protect people and businesses and keep the economy running. 5.7 billion K in total.