News Brief: IMF Completes First Review of Papua New Guinea Program and Approves US$ 24 Million Credit
October 13, 2000
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Papua New Guinea's performance under a 14-month, SDR 85.5 million (about US$ 111 million) stand-by arrangement. This opens the way for release of a further SDR 18.89 million (about US$ 24 million) from the arrangement.
Executive Directors approved the waiver for the nonobservance of the end-June 2000 structural performance criterion on the preparation of a plan for a comprehensive public sector reform. This plan has now been prepared and endorsed by the Cabinet. Executive Directors also granted a waiver of applicability of the end-September quantitative performance criteria, and approved a modification to the definition of a performance criterion.
At the conclusion of Executive Board discussions on Papua New Guinea's economic program, Shigemitsu Sugisaki, Deputy Managing Director, stated:
"The Papua New Guinea authorities are to be commended for their strong implementation of a macroeconomic stabilization and structural reform program that has provided an important boost to confidence and is laying the foundations for sustainable, private sector-led growth. Implementation of the Fund-supported program is on track. During the first half of 2000, the budget recorded a small overall surplus, reflecting higher oil prices, revenue measures adopted over the past year, and steps to improve expenditure control. The authorities have succeeded in mopping up the large overhang of liquidity at end-1999 that had threatened an acceleration of inflation. They have taken important steps to improve the governance, efficiency, and transparency of the public sector, and are making preparations for the privatization of the country's largest financial conglomerate. The improvement in performance and in confidence has been reflected in the external position since the end of 1999 and, under the flexible exchange rate regime, the kina has stabilized.
"Looking ahead, the authorities' main challenge will be to maintain financial stability while pressing ahead with implementation of their ambitious structural reform agenda. Monetary policy is to remain tight, with further cuts in interest rates awaiting clear signs that inflation is on a declining trend. Over the medium term, budget revenues from the petroleum sector are likely to decline because of falling output, and the required continuation of fiscal consolidation will call for further efforts to strengthen revenue administration and to rationalize the civil service. In the structural policy arena, priorities are to address the problems of the National Provident Fund; to proceed with privatization; and, more generally, to build on the important recent steps to raise the efficiency and transparency of the public sector. The recently prepared Public Sector Reform Program and the redesigned Rural Development Program will be of particular importance in this regard, " Mr. Sugisaki said.