Papua New Guinea has a long and prescriptive Constitution, provision for a number of constitutionally mandated bodies and office-holders, and a large number of entrenched Organic Laws. Organic Laws can only be amended by successive special majority votes of Parliament. Many legal practices and structures have been inherited from Australia, though many have been simplified and PNG is adapting many practices to its own context. The judicial arm is considered to be the best performing constitutional organ. It has developed a solid body of jurisprudence and demonstrated a good degree of independence, though it faces administrative and case management challenges. The legal framework has to be placed within context. The indigenous population of Papua New Guinea is one of the most heterogeneous in the world. PNG has several thousand distinct communities, most with only a few hundred people, divided by language, customs, and tradition, and some of these communities have engaged in low-scale tribal conflict with their neighbours for millennia. As a result, enforcing a formal legal framework at the sub- national or rural level represents an extreme challenge to the authorities. The Independent State of Papua New Guinea (PNG) is a constitutional monarchy with a Westminster-style parliamentary democracy political system. There is a unicameral national parliament that has 109 seats, of which 20 are occupied by the governors of the 19 provinces and the National Capital District (NCD). Members of parliament are elected by the people every five years. Electoral reforms in 2001 introduced a limited preferential vote system (LPV). The 2007 general election was the first to be conducted using LPV. Papua New Guinea gained independence from Australia on 16 September 1975.

The Papua New Guinea Vision 2050 is a forty-year strategy for the human, economic, institutional, environmental and community development for the nation. Supporting this is Papua New Guinea Development Strategic Plan 2010-2030 (DSP). The interaction between the DSP and Vision 2050 is not yet clear, though the DSP introduces more specific economic and public policies and sector interventions. A further series of 5 year Medium Term Development Strategies (MTDS) lay beneath the Vision 2050 and the DSP. The intention is for overarching longer term plans to cascade-down into a series of detailed implementation plans. The major 5 year plan presently is the MTDS 2005-2010 and the Medium Term Expenditure Framework , which provide a framework to guide the government’s development expenditure and serves as a guide for resource allocation and mobilisation. The strategy is based on export-driven growth, rural development and poverty reduction by means of promoting good governance and promoting key industries in which PNG has a comparative advantage on a sustainable basis. The MTDS identifies seven expenditure priority areas (EPAs) to guide public expenditure: Transport rehabilitation and maintenance; promotion of income earning opportunities; primary and preventive health; basic education; HIV/AIDS prevention; law and justice; and development oriented adult education. The government has decided on a balanced budget for 2010 to provide a stable macroeconomic and fiscal environment. The main over arching frameworks for financial management are the Medium Term Fiscal Strategy, Medium Term Debt Strategy, the Medium Term Development Strategy, the Public Finances (Management) Act 1995 and the Fiscal Responsibility Act 2006. Despite these extensive planning documents, and also the development of medium term expenditure frameworks in a number of sectors, there is not always a link between the higher level plans and the sector level national budgets. Similarly, plans are very rarely are linked to budgets at the provincial level. Program budgeting has also been introduced in the past few years. Like many other jurisdictions this has occurred in a piece-meal fashion such that in some agencies of government, programs are still organisational units. PNG has a ‘split-system’ of budgeting where ‘development’ expenditure of a ‘project’ or capital nature is budgeted separately from recurrent spending. Much of the development budget is controlled through Department of National Planning and Monitoring while Treasury manages the recurrent and national salary budget. However, some revenues are practically-speaking ‘off-budget’ and/or outside the reach of macroeconomic policy, such as flows from resource projects, state- business enterprises or old unspent monies from Trust Accounts. The overall credibility of the budget can vary. Provincial governments budget a mixture of national Function Grants tied to a number of service delivery sectors and partly to a range of ‘Minimum Priority Activities’, and unconditional internal revenue (largely resource rent and GST receipts). A limited number of provinces have significant internal revenue but most do not receive sufficient national government recurrent transfers to meet service delivery costs. Provincial and District Treasuries are outposts of the national Department of Finance and form the main control over provincial expenditure. Provinces report quarterly to national level on financial performance. The second quarter is a key report.

Medium Term Resource Framework^[7]

The Medium Term Resource Framework (MTRF) is an expenditure tool to ensure that the Budget is aligned to the Medium Term Development Strategy (MTDS) 2005-2010 Expenditure Priority Areas (EPAs), that the sequencing principle is followed and that development partners funds are matched to Government’s priorities, and therefore to its own allocation pattern. The MTRF assists the Government in achieving and managing an increased allocation of development expenditure towards the country’s greatest priority needs by modelling the shape of future annual budgets and generating parameters which guide how appropriations can be best used.