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Government Borrowing – Thoughts By Allan Bird

Government Borrowing

By Allan Bird – Governor ESP

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Government should never borrow for consumption purposes. Government should only borrow to invest in strategic projects that will result in economic returns that can then go towards loan repayment and services.

The K28b borrowed and spent by PNC in the last 8 years HAS NOT BROUGHT ANY TANGIBLE RETURNS to our country. If those borrowings had been spent well for a 10% return, we should see an extra K2.8b a year in government revenue.

The fact is government revenue has stalled at below K10b a year since 2011. There has been zero financial gain from the spending of the O’Neil government.

Having said that, if we are not going to borrow then we have to cut the budget to offset the debts.

With a K37b debt and a shrinking economy would it have been wise to cut spending this year? The simple answer is no. We have a poorly developed economy and the government remains the largest spender in the economy, cut back government expenditure in the economy and we risk a recession.

These are our choices in 2020 up until perhaps 2027. If we are going to be leaders of any worth, we should educate ourselves on what is needed to manage our country. Rather than just screaming and shouting and pointing fingers.

The choice PNG had was a Government LYING about the true state of finances and a new Government telling the TRUTH about it. It seems we in PNG have short memories. People were enjoying free education, free health care and free just about everything else and they forgot that nothing is free.

What our people were enjoying for free, was actually piling up in hidden debts. The government was living on bookings. Just like most of our people do every lus week.

We have a duty to understand the underlying economic problems facing our country. So can I encourage all of you to do that and to take the long view. Once we understand then we can debate meaningfully.

Our economic problems will not be fixed this year or next year. It will take 5-10 years of prudent investment and budget management to achieve it.

I am not a fan of borrowing but given our situation, I must admit, how do you get out of debt without borrowing?

The debt is absolutely staggering. So we either borrow or we die. At least borrowing gives us a fighting chance assuming we don’t squander it.

But anyone expecting a magic bullet to fix the budget and fix the debts is dreaming. It took 8 years to get the debt to this level. It’s going to take at least 8 years to bring it back to acceptable levels. Only fools expect miracles in 8 months.

Give the Marape/Steven government a chance. And judge us in 2022. That’s two and a half years from now, well short of the 8-10 years required to put this country back on track.

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