IMF Concludes Key Reviews, Consultation With PNG

• The Executive Board completed the Fourth Reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for Papua New Guinea, providing the country with immediate access to about US$172 million.
• The IMF Executive Board also completed the First Review under the Resilience and Sustainability Facility (RSF) arrangement, making available about US$28 million to support the authorities' policies to address longer-term structural balance of payments vulnerabilities associated with climate change. Papua New Guinea is the first Pacific Island country to access the RSF.
• The IMF-supported programs will continue to support Papua New Guinea's homegrown reform agenda, focusing on strengthening debt sustainability, alleviating FX shortages, fostering good governance, and building climate resilience, while protecting the vulnerable and promoting inclusive and sustainable growth.

Washington, DC: On June 13, 2025, the Executive Board of the International Monetary Fund (IMF) completed the Fourth Reviews of Papua New Guinea's ECF/EFF arrangements and the First Review under the RSF arrangement. [1] The authorities have consented to the publication of the Staff Report prepared for this consultation. [2] The completion of these reviews allows for the immediate disbursement of SDR 121.07 million (about US$172 million) under the ECF/EFF and SDR 19.74 million (about US$28 million) under the RSF, bringing total disbursements under the programs so far to SDR 461.93 million (about US$655 million). The Executive Board also concluded the Article IV consultation with Papua New Guinea.

The ECF/EFF arrangements with Papua New Guinea were approved by the Executive Board on March 22, 2023, in an overall amount equivalent to SDR 684.32 million (260 percent of quota) to help address a protracted balance of payments need—manifested in foreign exchange shortages—and to support the authorities' reforms to address longstanding structural impediments to inclusive growth. The 24-month RSF arrangement, which was approved by the Executive Board on December 11, 2024, in an overall amount of SDR 197.4 million (75 percent of quota), aims to help address risks to prospective balance of payments stability associated with longer-term structural challenges posed by climate change.

Papua New Guinea's economic outlook remains positive as structural reforms continue to bear fruit. Notwithstanding a weakening external environment, growth is expected to increase to 4.7 percent in 2025, driven by strong growth in the resource sector and resilient growth in the non-resource sector in part thanks to improvements in access to foreign exchange. Headline inflation is expected to rise to 4.8 percent from a very low base in 2024 and core inflation is expected to edge up to 4 percent. Over the medium term, growth is expected to moderate and stabilize at just above 3 percent, supported by the non-resource sector growth, with inflation remaining anchored at around 4.5 percent.

The outlook is subject to significant downside risks, as Papua New Guinea is vulnerable to both domestic and external shocks. These risks are exacerbated by considerable capacity constraints and socio-political fragility that limit the government's ability to design and implement policies aimed at economic stabilization, development, and climate adaptation. Commodity price volatility, as well as other global risks arising from geopolitical conflicts, geoeconomic fragmentation, trade barriers, and supply disruptions may create additional pressure on growth and inflation. On the upside, the kickoff of major resource projects, which are not yet in the baseline scenario, could boost economic growth in the medium run, with significant gains in exports and fiscal revenues once they begin operations.

Program performance has remained satisfactory, with the authorities displaying a sustained commitment to reforms. All but one end-December 2024 quantitative performance criteria and indicative targets under the ECF-EFF arrangements were met, and six out of eight structural benchmarks due were fully or partially implemented. One reform measure under the RSF arrangement was implemented.

At the conclusion of the Executive Board's discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:

"The Papua New Guinea (PNG) authorities have continued implementing their multipronged reform agenda under the Fund-supported programs, with the reforms continuing to bear fruit. Sustained commitment to these homegrown reforms will help achieve more resilient, inclusive, and greener economic growth.

"The authorities have been successfully reducing the fiscal deficit and adopted important amendments to the Income Tax Act—a major milestone in the simplification of tax policies. Going forward, further fiscal adjustment, guided by the implementation of the authorities' medium-term revenue strategy and supported by efforts to limit the growth of current spending and strengthen expenditure efficiency, would help to durably reduce debt vulnerabilities. Securing fiscal space for social and capital spending, engaging in prudent borrowing, and strengthening debt management capacity, including to avoid incurrence of arrears, are also essential.

"Foreign exchange shortages continued to ease, supported by central banking reforms, increased flexibility of the Kina, and favorable external conditions. The current crawl-like arrangement remains appropriate to bring the Kina to its market-clearing rate and facilitate the return to Kina convertibility. A tighter monetary policy stance, through timely adjustments in the KFR, is needed to ensure consistency between monetary policy and the exchange rate regime. Further efforts to modernize monetary policy operations, strengthen the Bank of PNG's liquidity management capacity, develop the interbank market, and operationalize its lender of last resort function would help to support financial sector development.

"Further strengthening governance and addressing the remaining gaps in the anti-money laundering and countering the financing of terrorism regime are critical. Meanwhile, macro-structural reforms should focus on improving PNG's external competitiveness and attracting foreign investment, including by removing barriers to trade, enhancing export capacity, and further diversifying the economy.

"Reforms under the new RSF arrangement will help the authorities build resilience against climate-related risks and address structural balance of payments vulnerabilities. The recent climate finance roundtable event, which provided several concrete and innovative climate finance options, will support the authorities' efforts to effectively scale up resources for climate action.

"The ECF/EFF and RSF arrangements will continue to support the authorities' homegrown reform agenda, helping 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 and other development partners will continue to underpin reform implementation.

Executive Board Assessment [3]

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their commitment to keep program performance on track in a fragile socio‑political environment and welcomed positive developments in macroeconomic and fiscal indicators. Given significant downside risks and elevated external uncertainty, they stressed the importance of building buffers to preserve macroeconomic stability. They encouraged the authorities to continue to advance critical structural reforms with the support of capacity development activities.

Directors supported the authorities' fiscal consolidation strategy and stressed the need for continued efforts to durably reduce public debt risks, including by enhancing the rules‑based fiscal framework, strengthening debt management capacity, and maintaining a prudent borrowing strategy. They called for a continued reduction of the fiscal deficit while securing space for development spending by combining revenue mobilization efforts with improvements in expenditure efficiency and cash management. They called for a timely adoption of the amendments to the Internal Revenue Commission Act to reinforce accountability in revenue collection.

Directors commended the progress achieved in implementing central banking reforms. They supported efforts to depreciate the Kina to its market‑clearing rate and gradually eliminate foreign exchange restrictions. They broadly concurred that a tighter monetary policy stance would help anchor inflation expectations and support the exchange rate regime, and emphasized the importance of liquidity management reforms to strengthen monetary policy transmission. They encouraged further development of the financial sector while containing financial stability risks.

Directors encouraged the authorities to further promote good governance, law and order, proactively enhance their AML/CFT framework, allocate sufficient budget resources to the Independent Commission Against Corruption, and swiftly appoint its oversight committee members. They also emphasized the need for enhancing transparency in the financial dealings of state‑owned enterprises.

Directors encouraged the authorities to expedite reforms to enhance external competitiveness and help attract foreign investment, including by improving the business environment, removing barriers to trade, enhancing export capacity, reducing gender imbalances, and further diversifying the economy. Directors commended efforts to scale up climate finance and called for maintaining focus on strengthening disaster risk management, setting up fiscal incentives for fuel efficiency and forest protection, and integrating climate considerations in infrastructure governance.

It is expected that the next Article IV consultation with Papua New Guinea will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/en/Countries/PNG page.

[3] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .