Morauta, a former central bank governor who came to power nine months ago on a platform of economic reform, told parliament it was clear after three months of the current budget that shortfalls were likely in some non-tax revenue areas. "In order to achieve the final budget outcome that we have planned for, prudence demands that corrective measures should be taken now to compensate for the projected shortfall," Morauta said in a statement to parliament released on Wednesday.

Morauta did not detail the size of the potential shortfall, but said it had come about because of over-estimation of revenue from land rates, fisheries licences and aviation landing rights. Morauta launched a two-pronged attack aimed at reducing the revenue shortfalls while at the same time attacking growing social problems which he said were often linked to alcohol abuse.

He said the government excise on spirits would increase by one-third to 200 per cent, while the excise on cigarettes would increase by 50 per cent to 240 per cent. Crime gangs known as Raskols operate freely in the capital of Port Moresby, where high fences topped with razor wire and barred windows on homes and businesses are commonplace.

The South Pacific nation has been riven by debt and political instability and Morauta inherited a near-bankrupt economy with the lowest levels of foreign reserves since independence from Australia in 1975. The 2000 budget announced in November a 2000 budget aimed to retire more than 1.0 billion kina (US$380 million) in debt. PNG's public debt stood at 2.2 billion kina in February. The 2000 budget forecast a headline budget deficit of 215 million kina against 172 million in 1999 and GDP growth of 4.7 per cent in 2000 against a forecast of 3.8 per cent in 1999.

Inflation was seen at 12.9 per cent, with a balance of payments surplus for the resource-rich nation of 328 million kina. In February, PNG announced a privatisation programme to raise two billion kina through the sell-off of ailing National carrier Air Niugini, telecommunications body Telikom, Post PNG and other government-owned bodies.

Reuters