December 29, 2017
In 2015-16, growth of the Papua New Guinea (PNG) economy slowed sharply, to under 3 percent, in response to falls in major export commodity prices, the completion of the huge PNG LNG pipeline project, ...
", "publishDate": "2017-12-29", "sections": [ { "heading": "Overview and recent developments", "content": "- Date: December 29, 2017.\n- In 2015-16, growth of the Papua New Guinea (PNG) economy slowed sharply, to under 3 percent, in response to falls in major export commodity prices, the completion of the huge PNG LNG pipeline project, and a severe drought.\n- In 2017 economic activity remained subdued.\n- Declining tax revenues and a substantial fiscal deficit, together with an increasing debt-to-GDP ratio, were driven by slow growth, generous tax treatment of the LNG project, the drought, and weak tax administration.\n- Inflation was boosted to over 6 percent by drought effects but is beginning to ease.\n- PNG is running a large current account surplus but is experiencing large financial account outflows related to project debt repayments, resulting in a shortage of foreign exchange (FX).\n- FX reserves have declined gradually to around $1.7 billion (covering 5 months of imports).\n- A new government, elected in July, introduced a Supplementary Budget in September with measures to narrow the fiscal deficit.\n- Outlook on unchanged fiscal and monetary policies:\n - Several more years of economic stagnation.\n - Growth expected to remain under 3 percent.\n - Inflation expected to continue easing.\n- Near-term risks are tilted to the downside, reflecting potential fiscal deficit financing difficulties and increasing distortions associated with the FX shortage.\n- Medium-term risks are more balanced due to upside potential from new resource sector projects and possibly a pickup in commodity export prices." }, { "heading": "Executive Board assessment and policy recommendations", "content": "- Directors noted causes of weak growth since 2016: weak prices for major export commodities, a severe drought, and the end of a major investment project.\n- Large financial account outflows related to project debt repayments contributed to a foreign exchange shortage.\n- Directors recommended decisive steps to strengthen fiscal and balance of payments positions.\n- Fiscal policy:\n - Strong commitment to fiscal consolidation over the medium term is essential to reduce the debt-to-GDP ratio and lower the risk of debt distress.\n - Fiscal consolidation should involve expenditure measures, including streamlining public sector employment and payroll.\n - Prioritize spending on education, health care and infrastructure.\n - Implement a medium-term strategy to increase revenues to support higher and more inclusive growth.\n- Exchange rate and monetary policy:\n - Increased exchange rate flexibility is needed to address the foreign exchange shortage and to offset the output effects of fiscal consolidation.\n - Recommended a gradual approach to exchange rate adjustment and flexibility to balance the impact on inflation in the short run.\n- Structural reforms:\n - Implement structural reforms to strengthen PNG’s non-resource sectors.\n - Development strategy should include measures to ensure PNG benefits more substantially from its natural wealth.\n- Other recommendations:\n - Continue efforts to improve macroeconomic statistics for completeness, timeliness and accuracy.\n - Continue to improve the effectiveness of the AML/CFT framework." }, { "heading": "Key indicators and projections (selected from Table 1)", "content": "- Nominal GDP (2016): US$21.1. billion 1/\n- Population (2016): 7.9 million\n- GDP per capita (2016): US$2,657\n- Quota: SDR 131.6 million (14th Review: SDR 263.2 million)\n\nReal sector (Percentage change)\n- Real GDP growth: 2013: 3.8; 2014: 12.5; 2015: 8.0; 2016: 2.4; 2017 Est.: 2.2; 2018 Proj.: 2.5\n- Resource 2/: 2013: 5.1; 2014: 71.5; 2015: 43.2; 2016: 6.4; 2017 Est.: 4.4; 2018 Proj.: 3.5\n- Non-resource: 2013: 3.6; 2014: 3.3; 2015: -1.2; 2016: 0.9; 2017 Est.: 1.4; 2018 Proj.: 2.1\n- Agriculture, forestry and fishing (share): 2013: 19.3; 2014: 17.8; 2015: 17.0; 2016: 17.4; 2017 Est.: 18.1; 2018 Proj.: 18.7\n- Mining and quarrying (share): 2013: 10.4; 2014: 9.1; 2015: 6.6; 2016: 7.5; 2017 Est.: 7.9; 2018 Proj.: 7.9\n- Oil and gas extraction (share): 2013: 3.2; 2014: 11.3; 2015: 19.7; 2016: 17.6; 2017 Est.: 15.4; 2018 Proj.: 14.5\n- CPI (annual average): 2013: 5.0; 2014: 5.2; 2015: 6.0; 2016: 6.7; 2017 Est.: 2.6\n- CPI (end-period): 2013: 2.9; 2014: 6.3; 2015: 3.4\n\nPublic finances (In percent of GDP)\n- Revenue and grants: 2013: 20.7; 2014: 21.0; 2015: 17.2; 2016: 15.6; 2017 Est.: 15.0; 2018 Proj.: 14.9\n - Of which : Resource revenue: 2013: 2.3; 2014: 1.0; 2015: 0.6; 2016: 0.5\n- Expenditure and net lending: 2013: 27.6; 2014: 27.3; 2015: 21.2; 2016: 20.2; 2017 Est.: 18.2; 2018 Proj.: 18.0\n- Net lending(+)/borrowing(-): 2013: -6.9; 2014: -6.3; 2015: -4.0; 2016: -4.6; 2017 Est.: -3.2; 2018 Proj.: -3.1\n- Non-resource net lending(+)/borrowing(-): 2013: -8.3; 2014: -8.6; 2015: -5.0; 2016: -5.2; 2017 Est.: -3.8; 2018 Proj.: -3.6\n\nMoney and credit (percentage change)\n- Domestic credit: 2013: 40.9; 2014: 23.5; 2015: 15.8; 2016: 24.6; 2017 Est.: 5.8\n- Credit to the private sector: 2013: 17.5; 2014: 7.2; 2015: 4.2; 2016: 3.0\n- Broad money: 2013: 10.9; 2014: 9.0; 2015: 8.5\n- Interest rate (182-day T-bills; period average): 2013: 5.3; 2014: 7.1; 2015: 7.4; 2016: 4.8\n\nBalance of payments (In billions of U.S. dollars)\n- Exports, f.o.b.: 2013: 8.8; 2014: 8.4; 2015: 7.8\n - Of which: Resource sector: 2013: 6.8; 2014: 6.5\n- Imports, c.i.f.: 2013: -6.5; 2014: -4.5; 2015: -2.7; 2016: -2.4; 2017 Est.: -2.5; 2018 Proj.: -2.6\n- Current account (including grants): 2013: 0.3; 2014: 3.1; 2015: -30.8; 2016: 1.3; 2017 Est.: 13.3; 2018 Proj.: 15.2\n- Gross official international reserves: 2013: 13.9; 2014: 14.4; 2015: 2.8; 2016: 1.9; 2017 Est.: 1.7\n- In months of goods and services imports: 2013: 4.3; 2014: 5.9; 2015: 5.5; 2016: 5.4\n\nPublic debt and external metrics\n- Government gross debt: 2013: 24.9; 2014: 27.1; 2015: 28.9; 2016: 33.3; 2017 Est.: 35.4; 2018 Proj.: 37.0\n- External debt-to-GDP ratio (in percent) 3/: 2013: 6.2; 2014: 8.9; 2015: 10.2\n- External debt-service ratio (percent of exports) 3/: 2013: 1.1; 2014: 1.6\n\nExchange rates and terms of trade\n- US$/kina (end-period): 2013: 0.4130; 2014: 0.3855; 2015: 0.3325; 2016: 0.3150\n- NEER (2005=100, end-period): 2013: 120.6; 2014: 114.2; 2015: 116.4; 2016: 104.2\n- REER (2005=100, end-period): 2013: 127.0; 2014: 123.6; 2015: 131.4\n- Terms of trade (2010=100, end-period): 2013: 99.3; 2014: 86.1; 2015: 70.6; 2016: 94.9; 2017 Est.: 85.0; 2018 Proj.: 84.8\n- Nominal GDP (in billions of kina): 2013: 47.7; 2014: 56.6; 2015: 63.6; 2016: 67.3; 2017 Est.: 70.2; 2018 Proj.: 73.2\n- Non-resource nominal GDP (in billions of kina): 2013: 41.2; 2014: 45.0; 2015: 46.8; 2016: 50.4; 2017 Est.: 53.8; 2018 Proj.: 56.8\n\nSources noted in the release: Department of Treasury; Bank of Papua New Guinea; and IMF staff estimates and projections.\n\nIMF Executive Board Concludes 2017 Article IV Consultation with Papua New Guinea, December 29, 2017.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Papua New Guinea and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea" } ], "bullets": [ "[Markdown version](/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/index.md)", "[Structured JSON version](/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/index.json)", "[Bundle manifest](/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/bundle-manifest.json)", "Published: December 29, 2017", "Date: December 29, 2017.", "In 2015-16, growth of the Papua New Guinea (PNG) economy slowed sharply, to under 3 percent, in response to falls in major export commodity prices, the completion of the huge PNG LNG pipeline project, and a severe drought.", "In 2017 economic activity remained subdued.", "Declining tax revenues and a substantial fiscal deficit, together with an increasing debt-to-GDP ratio, were driven by slow growth, generous tax treatment of the LNG project, the drought, and weak tax administration.", "Inflation was boosted to over 6 percent by drought effects but is beginning to ease.", "PNG is running a large current account surplus but is experiencing large financial account outflows related to project debt repayments, resulting in a shortage of foreign exchange (FX).", "FX reserves have declined gradually to around $1.7 billion (covering 5 months of imports).", "A new government, elected in July, introduced a Supplementary Budget in September with measures to narrow the fiscal deficit.", "Outlook on unchanged fiscal and monetary policies:", "Near-term risks are tilted to the downside, reflecting potential fiscal deficit financing difficulties and increasing distortions associated with the FX shortage.", "Medium-term risks are more balanced due to upside potential from new resource sector projects and possibly a pickup in commodity export prices.", "Directors noted causes of weak growth since 2016: weak prices for major export commodities, a severe drought, and the end of a major investment project.", "Large financial account outflows related to project debt repayments contributed to a foreign exchange shortage.", "Directors recommended decisive steps to strengthen fiscal and balance of payments positions.", "Fiscal policy:", "Exchange rate and monetary policy:", "Structural reforms:", "Other recommendations:", "Nominal GDP (2016): US$21.1. billion 1/", "Population (2016): 7.9 million", "GDP per capita (2016): US$2,657", "Quota: SDR 131.6 million (14th Review: SDR 263.2 million)", "Real GDP growth: 2013: 3.8; 2014: 12.5; 2015: 8.0; 2016: 2.4; 2017 Est.: 2.2; 2018 Proj.: 2.5", "Resource 2/: 2013: 5.1; 2014: 71.5; 2015: 43.2; 2016: 6.4; 2017 Est.: 4.4; 2018 Proj.: 3.5", "Non-resource: 2013: 3.6; 2014: 3.3; 2015: -1.2; 2016: 0.9; 2017 Est.: 1.4; 2018 Proj.: 2.1", "Agriculture, forestry and fishing (share): 2013: 19.3; 2014: 17.8; 2015: 17.0; 2016: 17.4; 2017 Est.: 18.1; 2018 Proj.: 18.7", "Mining and quarrying (share): 2013: 10.4; 2014: 9.1; 2015: 6.6; 2016: 7.5; 2017 Est.: 7.9; 2018 Proj.: 7.9", "Oil and gas extraction (share): 2013: 3.2; 2014: 11.3; 2015: 19.7; 2016: 17.6; 2017 Est.: 15.4; 2018 Proj.: 14.5", "CPI (annual average): 2013: 5.0; 2014: 5.2; 2015: 6.0; 2016: 6.7; 2017 Est.: 2.6", "CPI (end-period): 2013: 2.9; 2014: 6.3; 2015: 3.4", "Revenue and grants: 2013: 20.7; 2014: 21.0; 2015: 17.2; 2016: 15.6; 2017 Est.: 15.0; 2018 Proj.: 14.9", "Expenditure and net lending: 2013: 27.6; 2014: 27.3; 2015: 21.2; 2016: 20.2; 2017 Est.: 18.2; 2018 Proj.: 18.0", "Net lending(+)/borrowing(-): 2013: -6.9; 2014: -6.3; 2015: -4.0; 2016: -4.6; 2017 Est.: -3.2; 2018 Proj.: -3.1", "Non-resource net lending(+)/borrowing(-): 2013: -8.3; 2014: -8.6; 2015: -5.0; 2016: -5.2; 2017 Est.: -3.8; 2018 Proj.: -3.6", "Domestic credit: 2013: 40.9; 2014: 23.5; 2015: 15.8; 2016: 24.6; 2017 Est.: 5.8", "Credit to the private sector: 2013: 17.5; 2014: 7.2; 2015: 4.2; 2016: 3.0", "Broad money: 2013: 10.9; 2014: 9.0; 2015: 8.5", "Interest rate (182-day T-bills; period average): 2013: 5.3; 2014: 7.1; 2015: 7.4; 2016: 4.8", "Exports, f.o.b.: 2013: 8.8; 2014: 8.4; 2015: 7.8", "Imports, c.i.f.: 2013: -6.5; 2014: -4.5; 2015: -2.7; 2016: -2.4; 2017 Est.: -2.5; 2018 Proj.: -2.6", "Current account (including grants): 2013: 0.3; 2014: 3.1; 2015: -30.8; 2016: 1.3; 2017 Est.: 13.3; 2018 Proj.: 15.2", "Gross official international reserves: 2013: 13.9; 2014: 14.4; 2015: 2.8; 2016: 1.9; 2017 Est.: 1.7", "In months of goods and services imports: 2013: 4.3; 2014: 5.9; 2015: 5.5; 2016: 5.4", "Government gross debt: 2013: 24.9; 2014: 27.1; 2015: 28.9; 2016: 33.3; 2017 Est.: 35.4; 2018 Proj.: 37.0", "External debt-to-GDP ratio (in percent) 3/: 2013: 6.2; 2014: 8.9; 2015: 10.2", "External debt-service ratio (percent of exports) 3/: 2013: 1.1; 2014: 1.6", "US$/kina (end-period): 2013: 0.4130; 2014: 0.3855; 2015: 0.3325; 2016: 0.3150", "NEER (2005=100, end-period): 2013: 120.6; 2014: 114.2; 2015: 116.4; 2016: 104.2", "REER (2005=100, end-period): 2013: 127.0; 2014: 123.6; 2015: 131.4", "Terms of trade (2010=100, end-period): 2013: 99.3; 2014: 86.1; 2015: 70.6; 2016: 94.9; 2017 Est.: 85.0; 2018 Proj.: 84.8", "Nominal GDP (in billions of kina): 2013: 47.7; 2014: 56.6; 2015: 63.6; 2016: 67.3; 2017 Est.: 70.2; 2018 Proj.: 73.2", "Non-resource nominal GDP (in billions of kina): 2013: 41.2; 2014: 45.0; 2015: 46.8; 2016: 50.4; 2017 Est.: 53.8; 2018 Proj.: 56.8", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)", "[Papua New Guinea and the IMF](http://www.imf.org/external/country/PNG/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/index.md", "json": "/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/index.json", "bundleManifest": "/en/news/articles/2017/12/29/pr17523-imf-executive-board-concludes-2017-article-iv-consultation-with-papua-new-guinea/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T21:29:39.023Z" }