The current Intergovernmental Financing System is fragmented, and this has hindered efficient resource allocation in one way or the other to the subnational governments.
The National Economic and Fiscal Commission Chairman and Chief Executive Officer Patrick Kennedy Painap made this statement in the context that funds; FG, SIP, PIP, Province’s Internal Resources and Donor Agencies funds disbursed from Waigani must be seen as complementary-one must complement the other.
Mr Painap said, with the introduction of new policies and the establishment of entities at the subnational level, there currently exists an overlap in the functions and responsibilities for each level of government and institutions at the subnational level resulting in duplication, inconsistencies, and confusion as to “who” should do “what” and be accountable for funding to perform the assigned functions.
NEFC CEO Mr Painap said almost every country in the world today has some form of decentralized system of government.
“For the system to work effectively, certain principles and practices must be in place. “In PNG this is no different when it comes to decentralization and Intergovernmental Financing” he said.
Painap said, the principles that must guide PNG’s funding arrangements include; Funding follows functions, principles of equalization- (the function grants must be allocated according to fiscal capacity) Cost- how much does it cost to deliver priority services in each province?,Capacity- does the government have the capacity to provide the funds? and Performance- does provincial spending support service delivery?.
In 2020, the NEFC and the Department of Treasury were tasked by the Government through Provincial & Local Level Services Monitoring Authority to lead the review into the current intergovernmental financing system.
As the Chair to the review Mr Painap said this task needed a whole of government approach, thus 13 agencies were called upon to form PLLSMA sub-committee on the Intergovernmental Financing Arrangements.
Painap added that a series of Regional Consultations were conducted this year 2023 with the theme “Strengthening the Financing Systems for Greater Empowerment, Sustainable Development, and Economic Growth”.
“It was emphasized during the consultations that the need to review and strengthen PNG intergovernmental financing systems cannot be overstated. “As the country journeys forward, the fiscal frameworks must also evolve in tandem” he said.
Mr Painap highlighted that the Intergovernmental Financing Arrangement Review represents an integral step towards ensuring that provinces possess the administrative and financial powers and functions necessary for effective governance and development.
Painap iterated that the review is important as it seeks to address issues relating to the current intergovernmental system.
According to NEFC the scope of work on the IGFAR comprises of five phases, estimated to take four to five years.
Last year 2023 marks the end of phase one with four more phases to go estimated to be completed by 2026.