## IMF Executive Board Concludes 2018 Article IV Consultation with Papua New Guinea _IMF News, December 3, 2018_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2018 Article IV Consultation with Papua New Guinea](https://www.imf.org/en/news/articles/2018/12/03/pr18451-papua-new-guinea-imf-executive-board-concludes-2018-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2018/12/03/pr18451-papua-new-guinea-imf-executive-board-concludes-2018-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2018/12/03/pr18451-papua-new-guinea-imf-executive-board-concludes-2018-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2018/12/03/pr18451-papua-new-guinea-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: December 3, 2018 --- ### Macroeconomic outlook and recent developments - 2018 growth was adversely affected by a large earthquake that temporarily halted production in much of the resource sector; overall GDP growth for the year is estimated to be close to zero. - Growth is projected to recover to 3.8 percent in 2019 as resource output returns to normal. - Inflation eased to around 4½ percent, driven by weak demand and improved agricultural supply. - PNG faces a shortage of foreign exchange despite a large current account surplus; large resource export revenues are almost entirely offset by resource project debt repayments and dividends. - Rationing of foreign exchange has dampened growth. - International reserves stood at $1.7 billion at end-2017, equivalent to 5 months of imports. - Monetary authorities have begun addressing the foreign exchange problem by facilitating exchange rate adjustment, increasing the supply of foreign exchange, and strengthening the monetary framework. ### Fiscal position and public debt - The new government narrowed the fiscal deficit in 2017-18 and adopted a medium-term revenue strategy, but progress on fiscal consolidation has stalled and the debt-to-GDP ratio is well above the medium-term target. - Executive Directors welcomed confirmation of the government’s long-term debt/GDP target of 30 percent and the adoption of a zero non-resource primary balance as a medium-term objective. - The recent issuance of a debut sovereign bond was welcomed; authorities intend to use the funds to improve the domestic public debt profile and help resolve foreign exchange shortages. - Directors encouraged continued strengthening of the fiscal framework and noted that near-term additional fiscal consolidation is needed to reduce the risk of debt distress. - Suggested consolidation measures include a combination of increases in revenue and reductions in spending, particularly on the government wage bill and grants. - Directors welcomed the government’s commitment to domestic revenue mobilization through implementation of its Medium-Term Revenue Strategy and noted a significant increase in tax revenue through strengthened compliance and tighter government payroll controls. - Directors welcomed progress in strengthening public financial management. ### Exchange rate, foreign exchange operations, and financial sector - Directors agreed that greater exchange rate flexibility pursued in recent months should be continued to support growth in the non-resource sector. - Eliminating the backlog of foreign exchange orders and strengthening liquidity management and foreign exchange operations would support re-establishment of an interbank foreign exchange market. - Carefully monitoring the impact of foreign exchange measures on the financial sector is important. - Directors welcomed authorities’ intention to seek better terms in negotiations for new resource projects and to develop a framework for managing resource revenues. ### Structural and governance priorities - Development of the non-resource sector should be fostered through provision of public services and infrastructure and be considered in revenue mobilization. - Directors supported elimination of corruption and strengthening of governance as important parts of PNG’s development strategy and commended recent progress. - Improvements in macroeconomic statistics were welcomed; further progress is needed to improve data completeness, timeliness, and accuracy. Additional technical assistance was supported. ### Risks and scenarios - Near-term risks: roughly balanced. - A weakening of global growth could lower commodity export prices, dampening growth and making fiscal adjustment more difficult. - Reforms to exchange rate policy could have a more favorable impact on growth than expected. - Medium-term risks: skewed to the upside owing to the likelihood that new resource sector projects will begin to get underway. ### Executive Board assessment — key messages - Growth in 2018 remained sluggish due to low commodity prices and earthquake impacts on oil, gas, and mineral exports; expected to strengthen in 2019. - Strengthening macroeconomic policies and implementing structural reforms would reduce risks and support inclusive longer-term growth. - Adoption of an expenditure rule consistent with the revenue target would help reconcile fiscal targets and guide budget policy. - Continued efforts to strengthen domestic revenue mobilization, public financial management, and statistics are important. ### Key statistics and indicators (selected, as presented) - Nominal GDP (2016): US$21.1 billion 1/ - Population (2016): 7.9 million - GDP per capita (2016): US$2,353 - Quota: SDR 131.6 million (14th Review: SDR 263.2 million) Real sector (percentage change) - Real GDP growth: 2014: 15.4; 2015: 5.3; 2016: 1.6; 2017: 2.5; 2018 Est.: 0.0; 2019 Proj.: 3.8 - Resource: 2014: 69.2; 2015: 39.0; 2016: 6.3; 2017: 4.3; 2018 Est.: -6.8; 2019 Proj.: 8.3 - Non-resource: 2014: 7.0; 2015: -3.1; 2016: -0.1; 2017: 1.8; 2018 Est.: 2.6; 2019 Proj.: 2.2 - Agriculture, forestry and fishing (share): 2014: 17.8; 2015: 18.4; 2016: 18.5; 2017: 18.2; 2018 Est.: 18.7; 2019 Proj.: 18.6 - Mining and quarrying (share): 2014: 9.1; 2015: 7.7; 2016: 8.0; 2017: 7.6 - Oil and gas extraction (share): 2014: 11.3; 2015: 14.1; 2016: 15.0 Prices and monetary indicators - CPI (annual average): 2014: 5.2; 2015: 6.0; 2016: 6.7; 2017: 5.4; 2018 Est.: 4.8; 2019 Proj.: 4.7 - CPI (end-period): 2014: 6.6 Central government operations (percent of GDP) - Revenue and grants: 2014: 20.9; 2015: 19.3; 2016: 17.6; 2017: 17.9; 2018 Est.: 16.7 - Of which: Resource revenue: 2014: 2.3; 2015: 1.1; 2016: 0.7; 2017: 1.0; 2018 Est.: 0.5 - Expenditure and net lending: 2014: 27.2; 2015: 24.1; 2016: 22.8; 2017: 20.3; 2018 Est.: 20.8; 2019 Proj.: 19.0 - Net lending(+)/borrowing(-): 2014: -6.3; 2015: -4.8; 2016: -5.2; 2017: -2.7; 2018 Est.: -2.9; 2019 Proj.: -2.2 Money and credit (percentage change) - Domestic credit: 2014: 12.8; 2015: 23.5; 2016: 15.9; 2017: -1.0; 2018 Est.: 10.5; 2019 Proj.: -7.6 - Credit to the private sector: 2014: 3.5; 2015: 3.4; 2016: 7.2; 2017: -3.6; 2018 Est.: 3.1 - Broad money: 2014: 10.9; 2015: 0.9; 2016: 16.5; 2017: -10.5 - Interest rate (182-day T-bills; period average): 2014: 7.1; 2015: 7.4; 2016: 8.1 Balance of payments (in billions of U.S. dollars) - Exports, f.o.b.: 2014: 8.8; 2015: 7.8; 2016: 8.7; 2017: 9.7; 2018 Est.: 9.6 - Of which: Resource sector - Imports, c.i.f.: 2014: -4.5; 2015: -2.0; 2016: -2.5; 2017: -3.2 - Current account (including grants): 2014: 0.3; 2015: 2.4; 2016: 4.5; 2017: 4.9; 2018 Est.: 5.1; 2019 Proj.: 1.3 - Gross official international reserves: 2014: 11.8; 2015: 23.7; 2016: 23.9; 2017: 23.0 (in months of goods and services imports) - Gross official international reserves (in billions of U.S. dollars): 2016: 1.9; 2017: 1.7 - Government gross debt: 2014: 27.1; 2015: 32.3; 2016: 37.8; 2017: 37.5; 2018 Est.: 36.8; 2019 Proj.: 36.2 - External debt-to-GDP ratio (in percent) 3/: 2014: 6.2; 2015: 7.9; 2016: 10.2; 2017: 15.1 - External debt-service ratio (percent of exports) 3/: 2014: 1.4 Exchange rates and terms of trade - US$/kina (end-period): 2014: 0.3855; 2015: 0.3325; 2016: 0.3150; 2017: 0.3060 - NEER (2005=100, end-period): 2014: 114.2; 2015: 116.4; 2016: 104.2; 2017: 101.0 - REER (2005=100, end-period): 2014: 123.6; 2015: 131.4; 2016: 124.0 - Terms of trade (2010=100, end-period): 2014: 97.4; 2015: 102.0; 2016: 93.4; 2017: 85.0; 2018 Est.: 87.0; 2019 Proj.: 84.8 National accounts (kina) - Nominal GDP (in billions of kina): 2014: 56.8; 2015: 57.1; 2016: 59.6; 2017: 65.5; 2018 Est.: 70.8; 2019 Proj.: 75.2 - Non-resource nominal GDP (in billions of kina): 2014: 45.2; 2015: 44.7; 2016: 45.9; 2017: 50.2; 2018 Est.: 55.4; 2019 Proj.: 58.1 _Italic: IMF Executive Board Concludes 2018 Article IV Consultation with Papua New Guinea (Press Release No. 18/451), December 3, 2018._ --- ## Content in this bundle - **cr18352** - [cr18352 (Markdown version)](/-/media/files/publications/cr/2018/cr18352.pdf.md){rel="alternate" type="text/markdown"} - [cr18352 (PDF)](/-/media/files/publications/cr/2018/cr18352.pdf){rel="external" type="application/pdf"} --- ## References - [The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx) - [Guinea and the IMF](http://www.imf.org/external/country/GIN/index.htm) - [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) _Source: https://www.imf.org/en/news/articles/2018/12/03/pr18451-papua-new-guinea-imf-executive-board-concludes-2018-article-iv-consultation_