IMF Executive Board Completes the Fifth Reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF), and Second Review under the

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Fifth Reviews under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, and the Second Review under the Resilience and Sustainability Facility (RSF) arrangement for Papua New Guinea. The completion of these reviews allows for the immediate disbursement of SDR 121.07 million (about US$165 million) under the ECF/EFF arrangements and SDR 39.48 million (about US$54 million) under the RSF arrangement, bringing total disbursements under the IMF-supported programs so far to SDR 622.48 million (about US$851 million).

The ECF/EFF arrangements with Papua New Guinea were approved by the Executive Board on March 22, 2023, in an overall amount equivalent to SDR 684.32 million (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, which was approved by the Executive Board on December 11, 2024, in an overall amount of SDR 197.4 million (75 percent of quota), aims to help address risks to prospective balance of payments stability associated with longer-term structural challenges posed by climate change.

Papua New Guinea’s economic outlook remains positive as structural reforms continue to bear fruit. Growth is projected to reach 4.5 percent in 2025, driven by increased production in the resource sector and resilient growth in the non-resource sector supported by improvements in access to foreign exchange and favorable agricultural production. Headline inflation is expected to rebound to 3.8 percent in 2025 from a very low base in 2024 as the drag from the low betel nut prices eases. Over the medium term, growth is expected to moderate and stabilize at just above 3 percent, driven mainly by continued expansion of non-resource sector activities, with inflation converging to around 4.5 percent.

The outlook is subject to high uncertainty, with risks tilted to the downside, as Papua New Guinea remains vulnerable to both domestic and external shocks. These risks are exacerbated by considerable capacity constraints and socio-political fragility that limit the government’s ability to design and implement policies aimed at economic stabilization, development, and climate adaptation. Commodity price volatility, as well as global risks arising from geopolitical conflicts, escalating protectionist trade measures, prolonged uncertainty, and decline in international aid could create additional pressure on growth and inflation. On the upside, the kickoff of major resource projects, which are not yet in the baseline scenario, could boost economic growth in the near and medium run, with significant gains in exports once operations commence.

Program performance has remained satisfactory, with the authorities displaying a sustained commitment to reforms. All but one quantitative performance criteria and all indicative targets for end-June 2025 under the ECF-EFF arrangements were met, whilst all but one indicative targets for end-September 2025 were met. The Executive Board approved a waiver of nonobservance of the quantitative performance criteria on the fiscal deficit of the government for end-June 2025, based on the minor nature of the nonobservance and the corrective actions taken by the authorities. All five structural benchmarks due were met or implemented with delay and one structural benchmark due for the next reviews already met. Two reform measures under the RSF arrangement were implemented.

At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:

“The Papua New Guinea (PNG) authorities have accomplished steady progress in implementing their homegrown reform agenda under the Fund-supported programs. Sustained commitment to these reforms will help rebuild policy buffers, address the country’s long-standing structural challenges, and secure a more resilient, inclusive, and greener economic growth.

“The authorities have been successfully reducing the fiscal deficit, with additional consolidation efforts envisaged in the 2026 budget. Steps to durably increase revenue mobilization, consistent with the authorities’ Medium-Term Revenue Strategy, further contain the growth of current spending, and improve expenditure efficiency would help reduce public debt vulnerabilities. At the same time, protecting social and capital spending, strengthening debt management capacity, and modernizing cash management practices are also essential.

“Access to foreign exchange has improved significantly in recent months thanks to central banking reforms, increased flexibility of the Kina, and favorable external conditions. The current crawl-like arrangement remains appropriate to tackle the overvaluation of the Kina and facilitate its return to convertibility. A tighter monetary policy stance, through timely adjustments in the Kina Facility Rate, is needed to ensure consistency between monetary policy and the exchange rate regime. Additional steps to modernize monetary policy operations, strengthen the Bank of PNG’s liquidity management capacity, develop the interbank market, and contain financial stability risks would help to support financial sector development.

“Further efforts to promote good governance and enhance the effectiveness of anti-money laundering and countering financing of terrorism framework are critical to support the business environment. Delivering tangible and long-lasting results in the fight against corruption will be key to reinforcing the credibility of the Independent Commission Against Corruption.

“Building resilience to climate-related risks is crucial for achieving high and inclusive growth. The program supported by the Resilience and Sustainability Facility focuses on strengthening disaster risk management, integrating climate considerations in infrastructure governance, developing climate finance, and setting up incentives for forest protection and fuel efficiency will help attaining these objectives.”