- The Papua New Guinea authorities and the International Monetary Fund (IMF) staff team have reached a staff-level agreement on the policies needed to complete the sixth reviews under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and the third review under the Resilience and Sustainability Facility (RSF). Once approved by the IMF Executive Board, Papua New Guinea will have access to about US$216 million.
- The economy is projected to remain resilient, supported by continued implementation of the authorities’ homegrown reform agenda. However, growth in 2026 is projected to moderate to 3.8 percent while inflation is expected to increase to 5 percent due to the conflict in the Middle East and related increase in import costs.
- The authorities have made steady progress in implementing their structural reform agenda and have demonstrated strong commitment to program objectives, focused on advancing budget repair, easing FX shortages, modernizing central banking policies and operations, strengthening governance frameworks, and enhancing resilience to climate change.
Washington, DC: An International Monetary Fund (IMF) team led by Mr. Nir Klein, mission chief for Papua New Guinea (PNG), visited Port Moresby from March 19 to April 1, 2026, to review progress under the authorities’ homegrown economic reforms supported by the Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Resilience and Sustainability Facility (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 sixth reviews of the ECF and EFF arrangements and the third review of the RSF arrangement. 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 SDR98.7 million (approximately US$134 million) in financing under the RSF arrangement, bringing the total IMF financial support disbursed up to SDR781.71 million (approximately US$1.06 billion).
“Economic activity is expected to remain resilient, although real growth is projected to ease to 3.8 percent in 2026 from an estimated 5.6 percent in 2025. This easing reflects the levelling off of the LNG production capacity, and—amid unfolding events in the Middle East—weaker external demand for non-resource exports and higher import costs, including of oil. Headline inflation is projected to modestly increase to 5.0 percent in 2026 as the impact of the extension of GST relief until end-2026 is expected to be more than offset by higher import costs. Gross international reserves, which stood at around US$4 billion at end-December 2025 (equivalent to about five months of imports of goods and services), are expected to remain adequate.
“Performance under the Fund-supported program remains on track. The authorities have made steady progress in implementing their structural reform agenda and have demonstrated strong commitment to program objectives, focused on advancing budget repair, easing FX shortages, modernizing central banking policies and operations, strengthening governance frameworks, and enhancing resilience to climate change. All quantitative performance criteria and indicative targets for end-December 2025 have been met, and all structural benchmarks and RSF reform measures due in the current reviews have been implemented or are expected to be implemented in the coming weeks.Â
“The government remains committed to their ambitious fiscal consolidation strategy despite elevated uncertainty. The fiscal deficit narrowed further to 2.4 percent of GDP in 2025 from 3.3 percent in 2024, mainly reflecting an increase in resource revenues and rationalization of current spending. At the same time, capital expenditure as a share of GDP increased for the first time since 2021. Fiscal consolidation is set to continue in 2026, with the fiscal deficit projected to decline to 1.1 percent of GDP through a mix of additional revenue mobilization and contained growth of current expenditure. The authorities’ determination to balance the budget by 2027 will help to further reduce public debt vulnerabilities.
“The Bank of Papua New Guinea (BPNG) has made substantial progress in implementing its roadmap of reforms, paving the way for a gradual return to Kina convertibility. The crawl‑like arrangement has underpinned the exchange rate as the nominal anchor and has supported the narrowing of the Kina’s overvaluation. The latter, along with favorable commodity prices, has contributed to the easing of FX shortages. In parallel, BPNG has continued to modernize its monetary policy operations with a view to strengthening its liquidity management, and has made progress in operationalizing the lender of last resort regime. Going forward, aligning the Kina Facility Rate to ensure consistency with the exchange rate arrangement, enhancing clarity and transparency around some key operational parameters of the FX regime, and further building interbank market infrastructure are critical to strengthening central bank credibility, enabling FX market transactions, and improving monetary policy transmission.
“The authorities have taken important actions to address weaknesses in the anti-money laundering and countering financing of terrorism framework, but further efforts—focused on increasing operational competence, enhancing compliance, and strengthening internal coordination and international cooperation—are needed to facilitate a fast exit from the grey list. Decisive and swift implementation of the authorities’ Action Plan will be critical to limit reputational risks and adverse macroeconomic effects.
“To reduce longer-term balance of payment risks posed by climate change, the authorities have taken steps to incentivize more efficient consumption of high-carbon fuel and enable an environment for climate finance, including by developing and issuing guidelines for mandatory reporting of banks’ exposures related to three priority sectors. A new National Emergency Management Authority Act aimed at establishing a modern, centralized framework for disaster preparedness and response is close to being finalized. In addition, climate change considerations are being integrated into public investment management regulations as well as into maintenance standards and costing applied to national roads. The authorities are also committed to establishing a centralized database of climate mitigation and adaptation projects and developing a disaster risk financing strategy to strengthen resilience against disasters.
READ MORE: https://www.imf.org/en/news/articles/2026/03/31/pr26098-papua-new-guinea-imf-reaches-sla-6th-reviews-under-ecf-eff-3rd-review-under-rsf
