Papua New Guinea Reaches IMF Staff-Level Deal for Up to $189 Million

The Papua New Guinea authorities and International Monetary Fund staff reached a staff-level agreement on economic policies needed to complete the seventh reviews under the Extended Credit Facility and the Extended Fund Facility and the fourth review under the Resilience and Sustainability Facility, the final reviews under all three arrangements, the IMF said in an October 6, 2026 statement. Subject to approval by the IMF Executive Board, completion of the reviews would give Papua New Guinea access to up to US$189 million.

Completion would allow the 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, said Nir Klein, who led the IMF team. Total IMF financial support disbursed to Papua New Guinea would reach up to SDR881.73 million (approximately US$1,193 million). The announcement is an end-of-mission statement conveying the staff team’s preliminary findings after a visit to the country; staff will prepare a report that, subject to management approval, will be presented to the Executive Board for discussion and decision.

Klein said 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, El Niño-related disruption to agriculture and mining, and weaker non-resource sector activity tied 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 in 2026, driven by higher betelnut, food, and transport prices and partially offset by a recent broadening of GST relief. Gross international reserves stood at around US$4 billion at end-June 2026, equivalent to about five months of imports of goods and services, and are expected to remain adequate, he said.

Program Performance and Reform Agenda

All but one quantitative performance criterion and all indicative targets for end-June 2026 were met, and most structural benchmarks and several RSF reform measures have been completed or are advancing toward implementation, according to the statement, which described performance under the Fund-supported program as “broadly on track.”

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, despite a significant resource revenue windfall, Klein said. The authorities responded by adopting a supplementary budget in September 2026 and reaffirmed their commitment to achieving a 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. Klein said the recent gazettal of amendments to the 2019 Public Financial Management Act, which institutionalizes the Department of Treasury’s warranting power, is an important step and in line with an IMF recommendation.

The crawl-like exchange rate arrangement, adopted as the nominal anchor in January 2024, has supported a considerable narrowing of the Kina’s overvaluation and, together with favorable commodity prices, contributed to a significant easing of foreign exchange shortages, the statement said. Restoring Kina convertibility will require strengthening the credibility of the crawl-like arrangement through greater transparency about its operational parameters and clearer communication, encouraging price discovery within the announced limits, and gradually aligning the Kina Facility Rate to ensure consistency with the arrangement. Klein added that activating secured interbank lending, developing an interbank interest rate benchmark, and durably absorbing structural excess liquidity would strengthen monetary policy transmission, while 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.

Governance priorities named in the statement include operationalizing the Internal Revenue Commission Oversight Board, appointing permanent leadership for the Independent Commission Against Corruption, and ensuring the Bank of PNG Board is fully staffed. The authorities completed a National Risk Assessment and advanced key legislative reforms to strengthen the AML/CFT framework following Papua New Guinea’s grey-listing by the Financial Action Task Force. Decisive implementation of the FATF Action Plan remains critical to address the remaining gaps and facilitate a quick exit from the grey list, Klein said.

Under the RSF, the authorities are advancing climate reforms aimed at longer-term balance of payments risks associated with climate change, including disaster risk management, integrating climate considerations into public investment management, creating an enabling environment for climate finance, and strengthening fiscal incentives for forest protection and fuel efficiency. Next steps include establishing a National Emergency Management Authority, adopting public investment management regulations that incorporate climate considerations throughout the capital project cycle, and developing a centralized database of climate projects to improve information availability, the statement said.

Program History and Next Steps

The Executive Board approved the ECF/EFF arrangements on March 22, 2023, in an overall amount equivalent to SDR 684.32 million, or 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, approved on December 11, 2024, totaled SDR 197.4 million, or 75 percent of quota, and aims to help address risks to prospective balance of payments stability associated with longer-term structural challenges posed by climate change. The Board completed the sixth ECF/EFF reviews and the third RSF review on June 8, 2026, allowing the immediate disbursement of SDR 60.53 million (about US$82 million) under the ECF/EFF arrangements and SDR 59.22 million (about US$81 million) under the RSF arrangement and bringing total disbursements under the IMF-supported programs to SDR 742.23 million (about US$1,012 million).

When the Executive Board completed the sixth reviews in June 2026, IMF staff projected that growth would moderate to 3.8 percent in 2026 after accelerating to 5.6 percent in 2025. The October 6 statement puts 2025 growth at 6.2 percent and projects 3.1 percent for 2026.

Papua New Guinea has been an IMF member since October 9, 1975, and its last Article IV Executive Board consultation took place on June 13, 2025, according to the Fund’s Papua New Guinea country page. The country’s quota is SDR 263.2 million, and its outstanding purchases and loans stood at SDR 800.14 million as of March 31, 2026.

The mission, led by Klein, visited Port Moresby from September 24 to October 7, 2026, and met Minister for Treasury Ling-Stuckey, Bank of PNG Governor Genia, Treasury Secretary Oaeke, and Deputy Governor of BPNG Yabom, along with other senior government officials and representatives of the private sector, civil society, and development partners.

The Fund-supported program expires in December 2026. The IMF will maintain close engagement with the authorities through Article IV consultations and Post Financing Assessments and will support their reform efforts through continued delivery of technical assistance, the statement said, adding that a possible request for a successor Fund-supported program will be considered by the authorities after the 2027 general elections.