Papua New Guinea’s economic landscape is exhibiting promising signs of recovery, as highlighted by the International Monetary Fund’s recent assessments. The nation’s economic growth is projected to reach 4.5 per cent in 2024, up from 2.9 per cent in 2023, buoyed by the resumption of operations at the Porgera gold mine and improved access to foreign exchange.
Inflation has notably declined, with headline inflation dropping to below 1 per cent in 2024, a significant decrease from the historical average of 5-6 per cent. This reduction is largely attributed to a steep decline in betel nut prices. However, core inflation, which excludes volatile items, is expected to rise to 3.9 per cent in 2024 and 4.5 per cent in 2025, primarily driven by increases in food and transportation costs.
The foreign exchange landscape has also improved markedly. Wait times for foreign currency transactions have been significantly reduced, with small to medium enterprises now experiencing delays of just two to four weeks, a considerable improvement from previous periods.
In 2023, the IMF approved a US$918 million loan to Papua New Guinea, spanning 36 months, to support the nation’s economic reforms. A key condition of this loan was the introduction of a flexible exchange rate system by the Bank of Papua New Guinea, leading to a depreciation of the Kina. While a weaker Kina may attract private investment, there are concerns about potential imported inflation, which could increase the cost of goods and services. Historically, Kina depreciation has been associated with sharp rises in inflation, as noted by economist Dr. Thomas Wangi.
The IMF underscores the importance of continued reform discipline to sustain these positive trends. The medium-term outlook remains favourable, with growth expected to reach 4.6% in 2025. However, Papua New Guinea remains vulnerable to both domestic and external shocks, exacerbated by capacity constraints that affect the government’s ability to design and implement policies aimed at economic stabilisation, development, and climate adaptation.
The Asian Development Bank echoes this optimism, projecting growth rates of 3.3% in 2024 and 4.6% in 2025. The ADB emphasises the need for reforms to improve the financial sustainability of the power sector and infrastructure development, including increased use of renewable energy and private sector investment, to address power supply constraints on growth.
