Mr Speaker,

As someone on this side of the house, it is my national duty to scrutinise the budget. But let me clear up the air. I’m not here for political confrontation. I’m here for analytical clarity.

First, our government deserves acknowledgement for attempting to stabilise the fiscal position after years of global and domestic shocks. But stabilisation is not the same as resilience. Resilience is the foundation of stabilisation. A precursor. What we saw in the budget is not a resilience framework. Rather, we saw spending choices anchored in an unclear performance and accountability framework.  

One of the clearest examples lies in the large allocations to law and justice sector. More than two billion kina is committed to improving security, a priority no one disputes. Yet the allocation is not supported by measurable indicators. How can the parliament or the public assess whether these funds will translate into safer communities? Without targets on reducing domestic violence, reducing tribal fights, increasing crime response times or increasing corruption prosecutions, these funds risk becoming recurrent expenditures. Not investments for a safer society. In fiscal terms, this is a problem of allocative efficiency. Money is spent, but there is no systematic mechanism to judge its impact. We should tie every kina to an outcome, Mr Speaker.

A similar issue is with the infrastructure envelope, which is at K10.9 billion, the largest in our history. Infrastructure is essential for growth, but it is equally important that assets be maintained. This budget, however, provides little clarity on the long-term operations and maintenance costs that could inevitably follow large capital investments. Infrastructure without maintenance is a looming liability. Look at our provinces. They still lack technical engineering capacity, feeder roads are deteriorating, and facilities in government institutions like prisons are all run down. It’s worse in far-flung government stations. Take Usino Bundi, for instance; health facilities are all run down there. Continuous maintenance is key.

Our revenue policy also deserves careful assessments. The removal of GST from essential goods provides immediate relief, but it comes at the cost of K500 million in foregone revenue. That’s the equivalent of forgoing two world-class hospitals per year. Lest we forget. Since 2019, we have lost 20 of our dear colleagues, sadly to curable illnesses. Some of us are probably frequenting hospitals overseas. Fortunate enough. But think about the very people that voted us into this house. The silent majority.

See, this tax, the goods and services tax, is one of the few taxes in PNG that is broad-based. Reducing its scope is nothing but narrowing of our tax base. We are introducing structural weakness into future budgets, weakening our automatic stabilisers, and diminishing our ability to respond to shocks. An ugly creature called “fiscal fragility” emerging from this might continue to haunt us down the road, Mr Speaker. Research by tax expert from NRI in 2014 recommended that, though regressive in nature, GST should be kept for PNG. We just blew that up.

Mr Speaker, even more concerning are the foreign exchange valuation effects on the national debt. Table 27 in Volume 1 notes that external debt for 2024 increased by more than K1.18 billion purely due to movements in the exchange rate. Yet for 2025 and 2026, more than half of PNG’s debt is denominated in foreign currencies. We must have forgotten that the ongoing depreciating kina will increase the debt burden without a single toea of new borrowing. Ignoring valuation effects does not make them go away. It obscures the true scale of our fiscal vulnerability. This risk is real, immediate, and unavoidable. Yet it doesn’t seem to be in our public narrative—our grand speech—the budget speech.

At the provincial level, transfers continue to rise, reaching more than two billion kina. Yet the systems that monitor subnational expenditure — audits, financial reporting, digital PFM reforms — have not kept pace. Increasing funding without improving governance creates risks that accumulate over time. When large sums flow through weak systems, the probability of inefficiency grows, regardless of how good and righteous our political intent is.

Underlying all of these is the stagnation of public sector reform. Every year, personnel numbers continue to rise, but the systems that govern payroll, performance, and procurement are slow or remain unchanged, let alone our suffocating SOEs. Reforms in PNG is hard because of our ingrained clientelist political system. We are so much more concerned about local issues that spin us into parliament than issues of national interest. It’s a shame, Mr Speaker.

Hailing RESET for the next 50 years without bold reforms is simply branding ourselves as hypocrites. We can still do better. Bold steps need to be taken.

In sum, Mr Speaker,

Fiscal consolidation by the government is commendable. The concern here is not whether we are spending more or spending less. The concern here is that our current fiscal strategy should target and address the underlying structural issues, such as the narrow tax base, the fragile public institutions, inconsistent maintenance of public assets, and the debt profile exposed to external volatility. They have long constrained and posed risks for our development aspirations. We must build for resilience, securing our present and also adequately safeguarding our future too—head on.

Thank you, Mr Speaker.

Ref:

(1) The featured image and data come from The Budget Speech and Vol. 1.

(2) Some debt statistics come from the updated PNG Budget Database.