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Economist Says No LNG Earnings Unitl 2023

 

Source: 
The National, Wednesday 14th March 2012

By MALUM NALU

EARNINGS from the LNG project are not expected to be significant until after 2023, according to Asian Development Bank’s Papua New Guinea country economist, Aaron Batten. He told The National yesterday, after the release of the latest edition of ADB’s Pacific Economic Monitor, that this had to do with financing agreements of the project.

“For the first five to 10 years of LNG production, revenues will be quite small,” Batten said. “This has to do with financing agreements of the project,” he said.

Batten said: “This is accelerated depreciation (to do with tax benefits to the project).“LNG revenues for the first five to 10 years of the project will only replace the decline in other mineral revenues government receives.

“In the long term, things will get better, but over the medium term, government will face a growing fiscal challenge.”

Batten said government must ensure that enough funding was allocated to key service delivery priorities such as health, education and infrastructure.

“At one level, this will require an increasing prioritisation of these areas (health, education and infrastructure) within the budget,” he said.

“It will also require them to manage public expectations for improved service delivery as a result of LNG revenues, which are not expected to be large until after 2023.”

Batten said the major challenge facing the government right now was the declining revenue over the next two to three years, mainly because of the winding down of LNG construction, declining output from mines and oil fields, and agriculture exporters to face loss of competitiveness as a result of the high kina exchange rate.