IMF Managing Director Approves a Staff Monitored Program for Papua New Guinea

IMF News, February 20, 2020

Source details

Canonical URL: IMF Managing Director Approves a Staff Monitored Program for Papua New Guinea

Press Release No. 20/59
The Managing Director of the IMF approved on February 20, 2020, a Staff-Monitored Program (SMP) for Papua New Guinea.
Program coverage period: February 20, 2020 to June 30, 2021.
Monitoring frequency: bi-annual.

Papua New Guinea faces deep macroeconomic imbalances.
The economy has been hit by a series of shocks, including:
- lower commodity prices,
- a severe drought in 2015-16,
- a major earthquake in 2018.
Consequences described:
- undermined growth,
- revealed vulnerabilities in public finances and macroeconomic management,
- government revenues have stagnated,
- public deficits have widened,
- SOE losses have materialized,
- sharp increase in the ratio of public debt to GDP,
- shortages of foreign exchange have inhibited investment and growth in the non-resource sector.

The government, that assumed office in 2019, is committed to:
- addressing these imbalances,
- removing structural distortions currently undermining economic growth,
- clearing the backlog of foreign exchange orders,
- restoring the convertibility of the kina.
The authorities have adopted a comprehensive reform program including:
- measures to gradually reverse the recent build-up of public debt,
- measures to redirect public spending to more productive uses, including capital investment and the social safety net,
- implementation of a medium-term revenue strategy,
- comprehensive reform of state-owned enterprises (SOEs),
- steps to address problems of governance and corruption.

The SMP is designed to support the authorities’ reform agenda and assist in building a track record of implementation of a coherent set of economic and social policies to facilitate a return to sustained growth with macroeconomic stability.
Economic policies under the SMP emphasize:
- restoration of macroeconomic and financial sector stability,
- key reforms to bring expenditure under control while expanding government revenue,
- restoring the convertibility of the currency and clearing the backlog of foreign exchange in the economy,
- structural reforms to support stronger, more sustainable and inclusive growth.
The SMP includes important safeguards to protect the country’s most vulnerable people.

Main risks to the SMP:
- external events, such as a dramatic weakening of the external environment,
- natural disasters,
- potential slippages in the implementation of reforms given capacity constraints.
To mitigate risks from capacity constraints, the IMF will support the authorities’ efforts in all policy areas covered by the SMP through tailored technical assistance and policy advice.

International Monetary Fund