Public Sector Reform in Papua New Guinea and the 1999 Budget.

This paper describes how Papua New Guinea’s 1999 Budget, if implemented in full, would have reduced the country’s public sector to minimalist administrative functions, following termination of public funding for research and tertiary training institutes, and significant reductions in the already small police, defence, and prison services. The paper puts these ‘public sector reforms’ into their macroeconomic context and the context of previous attempts by Papua New Guinea to meet conditions laid down by the World Bank for Structural Adjustment Programme loans. Those conditions, however, did not include the elimination of public funding for activities that are rarely undertaken by the private sector, because of social externalities. The paper’s conclusion is that donors should use their leverage first to promote expansion of Papua New Guinea’s inadequate public services—inappropriately curtailed by the 1999 Budget—and, second, to reverse the overt political manipulation of the public service and the central bank, which substantially explains their recent poor performanc