PRIME MINISTER HON JAMES MARAPE RESPONDS TO AUSTERITY MEASURES QUESTION IN PARLIAMENT

Prime Minister Hon James Marape

For Immediate Release

Office Of

The Prime Minister,

Port Moresby

21st March, 2025

Prime Minister James Marape has dismissed proposals advocating for austerity measures as “extremely dangerous” and “irresponsible.” The Prime Minister was responding to a question from Sinasina-Yongomugl MP Kerenga Kua regarding the government’s approach to addressing budget deficits and ensuring economic stability.

Prime Minister Marape emphasized that the proposed austerity measures, which typically involve reducing government spending and increasing taxes to lower budget deficits, could cause far more harm to the economy than maintaining a deficit budget.

“Austerity measures may sound appealing on the surface, but in reality, their harsh impact would be devastating for our economy. If implemented, we would have had to make drastic cuts to essential services, including school fees, medicines, utilities, government rentals, and recurrent expenditures,” he stated.

The Prime Minister explained that during the economic downturn of 2020 caused by COVID-19, Papua New Guinea’s deficit surged to K7.3 billion due to a sharp decline in revenue from the global economic slowdown. Attempting to balance the budget during such challenging times would have required eliminating critical government spending.

“To eliminate the deficit in 2020, we would have had to cut K7.2 billion from the budget. This would have resulted in cancelling vital projects and services, including schools, hospitals, road infrastructure, and even payments to contractors and interest on long-term loans. Such actions would have been catastrophic for the country’s progress and well-being,” Prime Minister Marape said.

He noted that the government opted for a gradual approach to reducing the deficit rather than resorting to severe austerity measures. From a high of K7.3 billion in 2020, the deficit has been reduced to K2.9 billion in 2024, representing only 2.2% of GDP.

“This year’s deficit of 2.2% of GDP is a significant improvement from the 5% recorded in 2019 and the over 8% recorded in 2020. By next year, we expect the deficit to fall to under K1.6 billion. By 2027, we aim to achieve a surplus budget, which would be the first since 2008 or 2009,” Prime Minister Marape stated.

The Prime Minister also highlighted that the country’s debt-to-GDP ratio remains under control and within the parameters set by the Fiscal Responsibility Act amended in 2020.

“Our debt peaked at around 52-53% of GDP. In 2023, it was 52.4%, and this year it has fallen to 50.2%. By 2025, it is projected to drop to 47.4%. This demonstrates our commitment to prudent fiscal management while still meeting the developmental needs of our people,” he explained.

Prime Minister Marape further emphasized that the government has maintained spending during difficult times to keep the economy active. He pointed out that government spending has contributed to job creation and supported various sectors of the economy, including Connect PNG and small and medium-sized enterprises (SMEs).

He assured the House that the government’s plan aims to achieve a debt-free Papua New Guinea by the early 2030s, with 2034 being the latest target.

“Austerity measures may sound like a quick fix, but their consequences would be disastrous for our country. We are taking the responsible path of gradual deficit reduction, maintaining our spending on essential services, and working towards a balanced budget by 2027,” Prime Minister Marape concluded.