- The Papua New Guinea (PNG) authorities and the International Monetary Fund (IMF) staff have reached a staff-level agreement on economic policies needed to complete the seventh reviews under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and the fourth review under the Resilience and Sustainability Facility (RSF). Once approved by the IMF Executive Board, Papua New Guinea will have access up to US$189 million.
- Real GDP growth is projected to moderate to 3.1 percent in 2026, primarily reflecting plateauing of LNG production and El Niño-related disruptions to agriculture and mining. Spillovers from the ongoing war in the Middle East, including weaker external demand and higher import costs, are expected to constrain non-resource sector activity and raise headline inflation to 4.8 percent in 2026.
- The authorities have continued to advance key reforms to strengthen fiscal sustainability, ease FX shortages, modernize central banking, improve governance, and build climate resilience. Going forward, the IMF will continue the close engagement to support the authorities in implementing their homegrown reform agenda with a view to addressing the remaining vulnerabilities and promoting resilient and inclusive growth.
Washington, DC: An IMF team led by Mr. Nir Klein visited Port Moresby from September 24 to October 7, 2026, to review progress of the authorities' homegrown economic reforms supported by the ECF/EFF, and RSF arrangements.
At the conclusion of the mission, Mr. Klein issued the following statement:
"I am pleased to announce that IMF staff and the Papua New Guinea authorities have reached a staff-level agreement on policies needed to complete the final reviews of the ECF, EFF, and RSF arrangements. Upon approval by the IMF Executive Board, the completion of these reviews would allow for immediate disbursement of SDR60.53 million (approximately US$82 million) under the ECF/EFF arrangements and up to SDR78.96 million (approximately US$107 million) in financing under the RSF arrangement, bringing the total IMF financial support disbursed up to SDR881.73 million (approximately US$1,193 million).
"Economic activity is projected to remain resilient in 2026, albeit expanding at a slower pace. Real GDP growth is projected to moderate to 3.1 percent in 2026 from 6.2 percent in 2025, reflecting the plateauing of LNG production, the impact of El Niño on agriculture and mining, and weaker non-resource sector activity due to softer external demand and higher import costs arising from the ongoing war in the Middle East. Headline inflation is projected to increase to 4.8 percent driven by higher betelnut, food, and transport prices, partially offset by the recent broadening of GST relief. Gross international reserves, at around US$4 billion at end-June 2026 (equivalent to about five months of imports of goods and services), are expected to remain adequate.
"Performance under the Fund-supported program remains broadly on track. The authorities have continued to demonstrate strong ownership of the reform agenda, advancing fiscal consolidation, strengthening the crawl-like exchange rate framework, modernizing monetary policy operations, addressing AML/CFT deficiencies following the Financial Action Task Force's (FATF) grey-listing, and implementing climate reforms. All but one quantitative performance criterion and all indicative targets for end-June 2026 were met, while the structural reform agenda continues to progress, with most structural benchmarks and several RSF reform measures completed or advancing toward implementation.
"The authorities remain committed to their fiscal repair strategy. The fiscal deficit has narrowed considerably in recent years, and public debt has started to decline. Despite a significant resource revenue windfall, unexpected spending pressures and delayed transfers of state-owned enterprise dividends led to a temporary deviation from the fiscal deficit target in the first half of 2026. The authorities responded promptly by adopting a supplementary budget in September and reaffirmed their commitment to achieving the fiscal deficit objective of PGK 1.6 billion for 2026 while providing space to address emerging spending needs, including those arising from El Niño-related impacts. Going forward, finalizing legislative and regulatory reforms in revenue administration would support further fiscal consolidation, while improving cash management practices and preserving the Department of Treasury's (DoT) warranting authority is critical for strengthening expenditure control and fiscal accountability. In this context, the recent gazettal of the amendments to the 2019 Public Financial Management Act, which institutionalizes the DoT's warranting power, is an important step and in line with IMF recommendation.
"The Bank of PNG (BPNG) has made substantial progress in implementing its reform roadmap, paving the way for a gradual return to Kina convertibility. The crawl-like exchange rate arrangement, adopted as the nominal anchor in January 2024, has supported the considerable narrowing of the Kina's overvaluation and, together with favorable commodity prices, contributed to the significant easing of FX shortages. Going forward, restoring Kina convertibility will require strengthening the credibility of the crawl-like arrangement through greater transparency about its operational parameters and clearer communication. It will also require enabling the FX market, including by encouraging price discovery within the announced limits, and gradually aligning the Kina Facility Rate to ensure consistency with the crawl-like arrangement. Activating secured interbank lending, developing an interbank interest rate benchmark, and durably absorbing structural excess liquidity would also strengthen monetary policy transmission. At the same time, completing the emergency liquidity assistance operational framework, operationalizing the macroprudential framework, strengthening supervisory data and stress testing, and carefully sequencing the transition to the Treasury Single Account would help safeguard financial stability.
"Advancing governance and institutional effectiveness remains a priority. Operationalizing the Internal Revenue Commission (IRC) Oversight Board, appointing permanent leadership for the Independent Commission Against Corruption, and ensuring the BPNG Board is fully staffed will reinforce the credibility, accountability, and effectiveness of key public institutions. The authorities have also made important progress in strengthening the AML/CFT framework, including by advancing key legislative reforms and completing the National Risk Assessment. Decisive implementation of the FATF Action Plan remains critical to address the remaining gaps and facilitate a quick exit from the FATF's grey list.
"The authorities also continue to advance their climate reform agenda under the RSF to address longer term balance of payments risks associated with climate change. Progress has been made in strengthening disaster risk management, integrating climate considerations into public investment management processes, creating an enabling environment for climate finance, and strengthening fiscal incentives for forest protection and fuel efficiency. Steps to modernize the disaster risk management framework, including by establishing a National Emergency Management Authority with clear institutional mandates and enhanced coordination, and adopting public investment management regulations that incorporate climate considerations throughout the capital project cycle will further enhance climate resilience. In addition, continued development of a centralized database of climate projects to improve information availability would help unlock climate financing and support investment in climate mitigation and adaptation.
"With the Fund-supported program expiring in December 2026, the IMF will maintain close engagement with the authorities through Article IV consultations and Post Financing Assessments and support their reform efforts by continued delivery of technical assistance. A possible request for a successor Fund-supported program will be considered by the authorities after the 2027 general elections.
"The IMF team is grateful to the authorities for their warm hospitality, productive collaboration, and open policy dialogue. The team held meetings with Minister for Treasury Ling-Stuckey, Governor of BPNG Genia, Secretary of Treasury Oaeke, Deputy Governor of BPNG Yabom, and other senior government officials. The team also had constructive meetings with representatives from the private sector, civil society, and development partners."
