July 12, 2024
PRESS OFFICER: Randa Elnagar
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the Second Reviews of Papua New Guinea’s Fund-supported program. The 38-month Extended Credit Facility and Extended Fund Facility (ECF/EFF) arrangements, approved on March 22, 2023, support the authorities’ reforms to address long-standing structural impediments to inclusive growth. This review completion allows for the immediate disbursement of SDR 94.75 million (about US$125 million) toward budget support, bringing total disbursements under the program so far to SDR 226 million (about US$299 million).
Papua New Guinea’s economic outlook remains positive. Growth is expected to increase in 2024 to 4.6 percent from 2.9 percent in 2023, supported by the resumption of activities at the Porgera gold mine and by favorable commodity prices. Inflation is expected to normalize towards its historical average of around 5 percent. Gross international reserves stood comfortably at US$ 3.9 bn at end-2023, or 6.6 months of total imports, providing space to continue implementing central banking reforms. In completing the review, the Executive Board also approved a waiver of applicability for three end-June 2024 performance criteria, for which data are not yet available.
The medium-term outlook is positive but subject to risks. On the upside the start of the construction of major resource projects, which are not yet in the baseline scenario, could yield additional economic growth in the medium run, as well as gains in exports and fiscal revenues once they are operational. On the downside, Papua New Guinea is vulnerable to both domestic and external shocks, exacerbated by public debt, FX shortages, and capacity constraints that impact the government’s ability to formulate and implement economic stabilization and development policies. Papua New Guinea is also vulnerable to the consequences of climate change and particularly exposed to severe climate-related disasters.
Program performance has been satisfactory, with the authorities displaying a continued commitment to reforms. All end-December 2023 quantitative performance criteria and indicative targets were met, and most structural benchmarks have been implemented.
At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:
“The satisfactory program performance recorded over the second review period of the ECF/EFF arrangements continues to attest to the authorities’ strong commitment to reforms. They have successfully advanced the implementation of their reform agenda, while overcoming technical and institutional capacity constraints. The government is staying the course on its fiscal consolidation strategy, as the deficit was more than halved over the past three years. The central bank has successfully shifted to a crawl-like exchange rate arrangement, starting a gradual return to greater exchange rate flexibility and Kina convertibility; and its governance has been strengthened through the appointment of a permanent Governor and of a full Board. The operationalization of the Independent Commission Against Corruption is underway.
“The authorities should now build on these achievements and sustain their reform efforts towards more resilient, inclusive and sustainable growth. To address debt vulnerabilities, fiscal consolidation should continue, while creating fiscal space to meet development and climate adaptation needs and devising contingency plans to anticipate the possible materialization of fiscal risks, including from natural disasters. Accelerating the implementation of the Medium-Term Revenue Strategy will help to durably mobilize domestic revenue, while enhancements in public expenditure management will contribute to more efficient spending.
“The central bank is encouraged to persist in bringing the Kina closer to its market-clearing rate, while keeping inflation in check through appropriate monetary tightening, and to continue modernizing its monetary policy operations, in line with its sequenced roadmap of reforms. Providing appropriate resources and ensuring effective access to information will be critical for the Independent Commission Against Corruption to become fully operational.
“Given PNG’s high vulnerability to climate change, adaptation and disaster management policies are critical to the success of the authorities’ development strategy.
“The ECF/EFF arrangements will continue to support this homegrown reform agenda, helping to address balance of payment needs and rebuild buffers while avoiding disruptive adjustment, and catalyzing support from other international partners. Timely technical assistance and advice from the IMF will continue to accompany reform implementation.”
|
Table 1. Papua New Guinea: Selected Economic and Financial Indicators, 2020-2029 |
|||||||||||
|
Nominal GDP (2021): |
US$26.3 billion 1/ |
||||||||||
|
Population (2021): |
11.8 million |
||||||||||
|
GDP per capita (2021): |
US$2,217 |
||||||||||
|
Quota: |
SDR 263.2 million |
|
|||||||||
|
|
|
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
|
|
|
|
Est. |
Est. |
Est. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
|
|
|
(Percentage change) |
|||||||||
|
Real sector |
|
|
|
|
|
|
|
|
|
|
|
|
Real GDP growth |
|
-3.2 |
-0.8 |
5.2 |
2.9 |
4.6 |
3.7 |
3.4 |
3.0 |
3.1 |
3.1 |
|
Resource 2/ |
|
-9.2 |
-11.6 |
5.1 |
-0.4 |
5.3 |
2.1 |
1.4 |
0.1 |
0.2 |
0.2 |
|
Non-resource |
|
-0.4 |
3.8 |
5.2 |
4.1 |
4.4 |
4.2 |
4.1 |
4.0 |
4.0 |
4.0 |
|
Mining and quarrying (percent of GDP) |
10.2 |
8.2 |
8.2 |
8.7 |
9.5 |
10.2 |
10.5 |
10.3 |
10.1 |
9.9 |
|
|
Oil and gas extraction (percent of GDP) |
14.1 |
17.1 |
23.7 |
17.8 |
17.5 |
16.9 |
15.8 |
14.8 |
13.8 |
12.9 |
|
|
CPI (annual average) |
|
4.9 |
4.5 |
5.3 |
2.3 |
4.4 |
4.8 |
4.8 |
4.6 |
4.5 |
4.5 |
|
CPI (end-period) |
|
5.1 |
5.7 |
3.4 |
3.9 |
5.0 |
4.8 |
4.8 |
4.6 |
4.5 |
4.5 |
|
|
|
(In percent of GDP) |
|||||||||
|
Central government operations |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue and grants |
|
14.7 |
15.1 |
16.7 |
17.8 |
18.3 |
18.5 |
18.8 |
19.3 |
19.4 |
19.9 |
|
Of which: Resource revenue |
0.9 |
1.1 |
3.9 |
3.9 |
3.4 |
3.7 |
3.7 |
3.7 |
3.8 |
4.0 |
|
|
Expenditure and net lending |
23.5 |
22.0 |
21.9 |
22.1 |
22.2 |
21.1 |
20.2 |
19.3 |
19.3 |
19.6 |
|
|
Net lending(+)/borrowing(-) |
-8.9 |
-6.8 |
-5.3 |
-4.3 |
-3.9 |
-2.6 |
-1.4 |
0.0 |
0.2 |
0.4 |
|
|
Non-resource net lending(+)/borrowing(-) |
-9.8 |
-8.0 |
-9.2 |
-8.2 |
-7.3 |
-6.3 |
-5.1 |
-3.7 |
-3.6 |
-3.6 |
|
|
|
|
(Percentage change) |
|||||||||
|
Money and credit |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic credit |
2.3 |
15.9 |
1.5 |
14.9 |
11.1 |
9.6 |
4.1 |
5.1 |
16.8 |
5.3 |
|
|
Credit to the private sector |
4.2 |
2.5 |
6.9 |
14.9 |
9.8 |
9.0 |
8.8 |
8.6 |
8.6 |
8.5 |
|
|
Broad money |
7.0 |
13.4 |
14.7 |
9.9 |
-0.2 |
6.0 |
7.5 |
8.1 |
9.1 |
9.2 |
|
|
|
|
(In billions of U.S. dollars) |
|||||||||
|
Balance of payments |
|
|
|
|
|
|
|
|
|
|
|
|
Exports, f.o.b. |
|
9.1 |
11.3 |
14.4 |
13.9 |
14.4 |
15.3 |
15.8 |
15.9 |
16.3 |
16.9 |
|
Imports, c.i.f. |
|
-3.7 |
-5.1 |
-5.3 |
-5.4 |
-5.1 |
-5.4 |
-5.7 |
-5.9 |
-6.2 |
-6.5 |
|
Current account (including grants) |
3.4 |
3.5 |
5.3 |
5.1 |
3.7 |
4.5 |
4.2 |
3.5 |
3.1 |
3.3 |
|
|
(In percent of GDP) |
14.1 |
13.3 |
16.7 |
16.6 |
11.9 |
14.2 |
12.7 |
10.2 |
8.6 |
9.0 |
|
|
Gross official international reserves |
2.7 |
3.2 |
4.0 |
3.9 |
3.0 |
2.9 |
3.2 |
3.3 |
2.4 |
2.6 |
|
|
(In months of goods and services imports) |
4.5 |
5.1 |
6.6 |
6.6 |
4.8 |
4.5 |
4.8 |
4.8 |
3.5 |
3.6 |
|
|
|
|
(In percent of GDP) |
|||||||||
|
Government debt |
|
|
|
|
|
|
|
|
|
|
|
|
Government gross debt |
|
48.7 |
52.6 |
48.3 |
52.0 |
52.5 |
51.2 |
49.1 |
45.7 |
43.2 |
40.4 |
|
External debt-to-GDP ratio (in percent) 3/ |
21.8 |
25.0 |
23.5 |
25.4 |
29.2 |
30.5 |
31.2 |
29.8 |
26.7 |
24.4 |
|
|
External debt-service ratio (percent of exports) |
5.4 |
4.1 |
2.1 |
2.7 |
3.4 |
4.5 |
5.4 |
5.6 |
8.9 |
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rates |
|
|
|
|
|
|
|
|
|
|
|
|
US$/kina (end-period) |
|
0.2850 |
0.2850 |
0.2840 |
0.2683 |
… |
… |
… |
… |
… |
… |
|
NEER (2005=100, fourth quarter) |
90.7 |
91.2 |
100.3 |
101.1 |
… |
… |
… |
… |
… |
… |
|
|
REER (2005=100, fourth quarter) |
122.6 |
125.1 |
135.5 |
134.7 |
… |
… |
… |
… |
… |
… |
|
|
Terms of trade (2010=100, end-period) |
55.1 |
48.3 |
69.1 |
66.4 |
65.5 |
67.9 |
67.9 |
66.6 |
66.1 |
66.2 |
|
|
Nominal GDP (in billions of kina) |
82.5 |
91.6 |
111.2 |
111.3 |
123.2 |
133.6 |
143.2 |
152.4 |
162.1 |
172.8 |
|
|
Non-resource nominal GDP (in billions of kina) |
62.5 |
68.4 |
75.7 |
81.8 |
89.8 |
97.4 |
105.5 |
114.1 |
123.4 |
133.4 |
|
|
Sources: Department of Treasury; Bank of Papua New Guinea; and IMF staff estimates and projections. |
|||||||||||
|
1/ Based on period average exchange rate. |
|||||||||||
|
2/ Resource sector includes production of mineral, petroleum, and gas and directly-related activities such as mining and quarrying, but excludes indirectly-related activities such as transportation and construction. |
|||||||||||
|
3/ Public external debt includes external debt of the central government, the central bank, and statutory authorities. |
|||||||||||
