A report released by the PNG National Research Institute (PNG NRI) today stressed that the Government of Papua New Guinea (GoPNG) must implement the economic stimulus package in an effective and efficient manner to boost demand for goods and services.
The author of “Potential strategy to boost aggregate demand for goods and services in Papua New Guinea during the COVID-19 Pandemic”, PNG NRI Deputy Director Research, Associate Professor Eugene Ezebilo, stated that this is one of the main intervention strategies to mitigate the impact of COVID-19 on PNG’s economy.
The lockdown measures that was implemented by GoPNG to prevent the spread of COVID-19 restricted the movement of people, supply of goods and services and total quantity of goods and services bought (aggregagte demand).
“It is necessary to boost aggregate demand to reduce the risk of the economy slipping into recession,” Prof Ezebilo stated.
GoPNG has declared a K5.7 billion economic stimulus package, with Internal Revenue Commission (IRC) providing opportunity for business owners to pay corporate and personal income tax in installments until 30 June 2020.
However, Prof Ezebilo said for the stimulus package to boost aggregate demand it must be implemented in an effective and efficient manner and monitoring and evaluation conducted to see that the fund is used for what it is meant for.
Although the payment of tax in instalments is a good development, the window of this opportunity is too short, IRC should consider continuing the arrangement until such a time that a solution is found to the COVID-19 pandemic.
GoPNG should consider implementing other intervention measures to boost aggregate demand such as bailout of firms in the sectors that have been hit hardest; and provide long-term loans to micro, small and medium enterprise operators at low interest rates to reduce supply and demand shocks. Consider providing cash transfers to informal business operators with the aim of promoting financial inclusion, registration of businesses in informal sector and social insurance for households whose livelihoods are strongly linked to the informal economy.
The report can be accessed on the PNG NRI website: https://pngnri.org/; and social media pages: