News Brief: IMF Concludes Fourth Review of Papua New Guinea Program, Approves US$24 Million Credit
September 24, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Papua New Guinea's performance under a Stand-by Arrangement, which enables the release of SDR 18.885 million (about US$24 million). The Executive Board's decision will bring total disbursements to Papua New Guinea under the Stand-by Arrangement to SDR 85.54 million (about US$111 million).
At the conclusion of the Executive Board discussions of Papua New Guinea's economic program, Eduardo Aninat, Deputy Managing Director, stated:
"Despite difficult political and economic circumstances, Papua New Guinea has made progress toward stabilization and structural reform under the program supported by the Stand-By Arrangement. Inflation has declined and official international reserves have increased over the course of the program period. Structural reform has also progressed, albeit at a slower pace than previously anticipated. The weak state of the economy led to a shortfall in tax revenue during the first half of 2001, but the authorities cut government expenditure to limit the overall fiscal deficit while protecting the provision of essential social spending.
"The authorities should continue to monitor the fiscal position closely, and stand ready to take corrective measures in order to safeguard the government's macroeconomic objectives. Close collaboration with multilateral agencies and bilateral donors and effective provision of technical assistance will be essential to ensure that agreed structural reforms are completed in the near future, thus allowing the timely release of the external financing expected to materialize during the fourth quarter of 2001 and beyond.
"In the period ahead, monetary policy should be focused on reducing inflation and strengthening the official international reserve position. The credibility of the authorities' macroeconomic policies will also be closely linked to the implementation of a prudent budget for 2002. External financing of the budget would need to be secured for 2002. Expenditure restraint, including through wage moderation and increased efficiency in the delivery of services, will need to be observed and the size of the deficit limited to available non-inflationary financing.
"The authorities intend to press ahead with their structural reform agenda. Proceeding with privatization of key public sector entities and improving governance will be critical," Mr. Aninat said.