This is because of a drop in oil production from existing oil fields and the impacts of the world financial crisis which had seen major commodity prices drop to all-time lows.
Only gold is constant at over $700 per ounce and cocoa, which was experiencing a 23-year high due to a drop in global supplies.
This was the observation from Institute of National Affairs director Paul Barker when contacted to comment on the dropping commodity prices and government revenue projections.
He said the government and the Central Bank would need to watch the trends closely and be ready to adjust expenditure accordingly, if necessary, including redirecting funds from trust funds and other areas back to core recurrent expenditure, including hospital drugs if necessary.
Although some mining projects are expected to come on stream this year including the Ramu nickel mine, Barker lamented that RNM had been granted a 10-year tax break and was not expected to contribute much to government coffers.
“The budget expectation that agriculture will make up much of the gap this year is unrealistic as agriculture prices have fallen drastically,” Barker said.
He, however, added that it was still early days and there had been some recovery in some prices.
But government sources said increased gold production this year was expected to offset any shortfalls.
Barker said if there was a key economic downturn, the government should focus on programs to restore key infrastructure and continue providing employment.
However, he stressed that PNG could not afford to borrow to spend, adding that it was fortunate that PNG has “good accumulated savings.”
“It just needs to ensure it uses them wisely and doesn’t blow them on low priorities,” Barker said.
