Treasury prepares for coronavirus impacts
The Minister for Treasury says the coronavirus disease, or COVID-19, continues to rapidly evolve and as such, PNG has stepped up efforts to prepare for its impacts.
“The World Health Organisation (WHO) now estimate over 110,000 cases across 109 countries, with over 4,000 deaths,” stated Treasurer Ian Ling-Stuckey.
“Most of the cases remain in China but there’s growing numbers outside of China with nearly 33,000 cases and 872 deaths.
Even though PNG still hasn’t reported any cases, nearby countries of Australia, Singapore and Malaysia and now Brunei have cases.
“These latest developments highlight the importance of the Government’s efforts in prevention and preparedness.
I have already hosted, last Thursday, a roundtable with economic and health experts to discuss the actions required to best prepare for the impacts of the coronavirus.
This was followed this Monday by a targeted meeting with economists from my Department with the National Department of Health, the World Bank, the Asian Development Bank and the Institute of National Affairs to step through in more detail the budgetary and economic impacts and how best to model these for the PNG economy.
“We will continue these discussions over coming days and weeks to ensure the Marape-Steven government has the most up-to-date assessment.
“Already, the global crisis has led to a collapse in the oil and LNG prices down to $US30 per barrel.
If this price shock was to continue then we are likely to lose K500 million resource tax revenues and likely, a further K500 million from KPH and K300m from Ok Tedi in lost dividends paid to the government.
“These are just what are known as first round impacts.
There will be broader impacts across other sectors essential to PNG’s budget and economy.
For example, coffee prices have fallen, reflecting the lower demand by cafes around the world having to close in response to coronavirus.
“The economic modelling will use two different scenarios. This is sensible planning to consider the different impacts.
“The ‘contained’ scenario assumes the coronavirus is not spread within PNG and all the impacts on PNG are from the world economy.
We lose massive tax revenues and key parts of our economy closely linked to the world economy, like our resource sector and exported crops like coffee could be badly affected.
This would still be a negative hit on growth, potentially putting PNG into a mild recession and would require major financial assistance and a supplementary budget.
“The ‘uncontained’ scenario is where coronavirus spreads throughout the country. The economic and health implications will be much more serious. Modelling is still occurring on the possible extent of the crisis.
“These estimates of the impacts will continue to vary. This highlights the rapidly evolving nature of the coronavirus overseas and understanding the extent of the economic impacts across the global economy and on our close economic and trading partners.
“We are actively exploring options to fill some of these gaps from international assistance.
The new IMF facility could provide up to 100 percent of our annual IMF quota to total over K1.1 billion ($US364m) and the option of additional World Bank funding for the budget and health activities.
“However, given the likely revenue implications in even the ‘contained’ scenario, then there will be a need for a Supplementary Budget. Economic Ministers will begin examining options for cutting the budget.
“I will update the next Ministerial Economic Committee meeting on Tuesday 17 March on these discussions and results to date, in addition to keeping our National Executive Council informed.
“I will also keep the people of PNG informed as we get more details on the potential budgetary and economic impacts.
“We want to assure you the Marape-Steven Government will continually demonstrate its leadership through actions and using facts to inform our advice instead of preaching doom and stirring up panic that is counterproductive and misleading for the people of PNG.”