IMF Reaches Staff-Level Agreement with Papua New Guinea on the Fifth Reviews Under the Extended Credit Facility and the Extended Fund Facility and the Second Review Under the[...]

IMF Reaches Staff-Level Agreement with Papua New Guinea on the Fifth Reviews Under the Extended Credit Facility and the Extended Fund Facility and the Second Review Under the Resilience and Sustainability Facility

October 7, 2025

• The Papua New Guinea authorities and the IMF team reached staff-level agreement on the policies needed to complete the fifth reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).
• Completion of the reviews, subject to approval by the IMF Executive Board, would allow a disbursement of about US$220 million.
• The economic outlook remains positive, with economic growth picking up to 4.5 percent in 2025 and inflation increasing to 3.8 percent from historically low levels. The authorities continue to make progress on their homegrown economic reforms.

Washington D.C.: An International Monetary Fund (IMF) team led by Mr. Nir Klein, mission chief for Papua New Guinea (PNG), visited Port Moresby from September 25 to October 8, 2025, 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 PNG authorities have reached a staff-level agreement on policies needed to complete the fifth reviews of the ECF and EFF arrangements and the second review of the RSF arrangement. Upon approval by the IMF Executive Board, the completion of these reviews would allow for the immediate disbursement of SDR121.07 million (approximately US$165 million) under the ECF-EFF arrangements and SDR39.48 million (approximately US$54 million) in financing under the RSF arrangement. This would bring the total IMF financial support disbursed thus far under these arrangements to SDR622.48 million (approximately US$853 million).

"PNG's economic outlook remains positive. Growth is expected to increase to 4.5 percent in 2025 from an estimated 3.8 percent in 2024, supported by increased production of Porgera gold mine, continued improvement in access to foreign exchange (FX), and favorable agriculture production. Average headline inflation is projected to rebound to 3.8 percent in 2025 from a historical low of 0.6 percent in 2024 as the drag from betel nut prices eases, while core inflation, which excludes selected volatile items, is projected to edge up to 3.3 percent in 2025, staying below the historical average. Gross international reserves, which stood at US$3.6 billion at end-July 2025 (equivalent to about five months of imports of goods and services), are expected to remain adequate and support the crawl-like exchange rate arrangement.

"Performance under the Fund-supported programs has been satisfactory. The authorities have also made steady progress in implementing their structural reform agenda and demonstrated strong commitment to program objectives. All, but one, quantitative performance criteria and indicative targets set for end-June 2025 were met, and most structural benchmarks due by end-September 2025 were implemented. Two RSF reform measures scheduled for this review are on track to be implemented in the coming weeks. These reforms have yielded notable results thus far, including i) a sharp reduction of the fiscal deficit, helping to alleviate public debt vulnerabilities, ii) improved access to FX and mopping of a significant part of excess liquidity, iii) establishment of an operational anti-corruption framework, and iv) easier access to data on natural disasters to support a climate-conscious decision-making.

"The government remains committed to an ambitious fiscal consolidation strategy in line with its 13-year budget repair plan. Having reduced the fiscal deficit by 1.1 percentage point of GDP in 2024, the authorities are on track to deliver a reduction of at least 0.6 percentage point of GDP in 2025, through both revenue mobilization and expenditure rationalization. The authorities plan to further reduce the deficit in the upcoming 2026 budget, consistent with their objective of reaching a balanced budget in 2027 and are committed to implement a prudent borrowing strategy aimed at reducing public debt vulnerabilities.

"The Bank of Papua New Guinea (BPNG) has continued to actively implement its roadmap of reforms to help alleviate FX shortages, gradually return to Kina convertibility, and modernize its monetary policy operations. Access to FX has improved significantly in 2025, supported by the implementation of the crawl-like arrangement, BPNG's FX intervention strategy, and favorable commodity prices, which have contributed to buoyant export proceeds. The Monetary Policy Committee's decision to increase the Kina Facility Rate in September 2025 is a welcome step to ensure consistency with the exchange rate arrangement while the continued reduction of the Cash Reserve Requirement ratio will help ease liquidity conditions in the banking system. To improve monetary policy transmission and facilitate a more active interbank market, the BPNG continues to build up the critical operational and legal frameworks and enhance its liquidity management and emergency lending toolkit.

"Despite recent challenges, the Independent Commission Against Corruption (ICAC) has started to deliver on its anti-corruption mandate, quickly ramping up its investigation capacity. The forthcoming appointment of an oversight committee will further strengthen the governance of ICAC and enhance its effectiveness. The authorities are actively addressing critical gaps in the anti-money laundering and countering the financing of terrorism regime, through coordinated government-wide efforts.

"To enhance balance of payments resilience against climate-related risks, the authorities have made efforts to strengthen disaster risk management practices and to review tax regimes in the logging sector. They are also committed to further integrating climate considerations in infrastructure governance, enabling climate finance, preserving forest resources, and enhancing energy efficiency, in line with their international climate commitments and supported by the RSF arrangement.

"The IMF will continue to work closely with the authorities and stands ready to help them, not only through financing and policy advice, but also through capacity development, coordinated with other partners.

"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 and development partners."