IMF Executive Board Approves a US$363.6 Million Disbursement to Papua New Guinea to Address the COVID-19 Pandemic

June 9, 2020

  • The IMF Executive Board approved the disbursement of US$363.6 million in emergency financing to help Papua New Guinea address urgent balance of payments needs created by COVID-19.
  • IMF financing support provides resources to the authorities to maintain macroeconomic stability with the aim of assisting the private sector adversely affected by COVID-19.
  • To address the pandemic, the Government of Papua New Guinea has taken measures to support businesses, workers, and households to safeguard the health and livelihoods of the population.

The Executive Board of the International Monetary Fund (IMF) approved a disbursement to Papua New Guinea (PNG) under the Rapid Credit Facility (RCF) equivalent to SDR 263.2 million (about US$363.6 million, 100 percent of quota) to help cover urgent balance of payments needs stemming from the global COVID-19 pandemic.

The COVID-19 pandemic is hitting the PNG economy hard, through export losses and the impact of measures to mitigate transmission of the virus. The crisis erupted as the government was beginning to implement wide-ranging reforms under a Staff-Monitored Program (SMP). The authorities have acted forcefully to prevent a significant outbreak of the COVID-19 virus. While these efforts have been successful to date, the economic impact of mitigation measures and export losses is likely to lead to negative growth in 2020 and has generated significant fiscal and balance of payments financing needs. Lower resource export earnings have led to a large balance of payments shortfall of around 4 percent of GDP, while measures to contain the spread of the virus are dampening economic activity and government revenues, leading to a substantial widening of the budget deficit to over 6 percent of GDP.

With limited scope for increasing borrowing domestically or abroad, the authorities’ economic policy response has focused on reallocating spending within the budget envelope towards health care2, as well as facilitating access of unemployed workers to superannuation savings, and encouraging banks to support individuals and businesses adversely affected by the economic downturn. Despite the COVID-19 crisis, the authorities have re-affirmed their commitment to reform, and PNG’s longer-term outlook remains positive, based on the SMP reform agenda and the likelihood that major resource projects will come to fruition in coming years.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:

“Papua New Guinea is facing headwinds at a time when its economy is already fragile and has limited fiscal space. The COVID-19 pandemic is expected to have a significant negative impact on domestic economic activity and growth. The fall in global prices for some of its major exports is posing additional challenges. These developments have led to a sharp fall in export revenues and an urgent balance of payments financing need. IMF support, through the Rapid Credit Facility, would help meet immediate financing needs and should catalyze financial support from development partners.

“The authorities have taken quick action and implemented measures to prevent transmission and spread of the COVID virus. They have also taken a series of policy measures, including fiscal and financial measures, to support activity and incomes, despite a substantial fall in government revenues. With very limited fiscal space, measures have focused mainly on redirecting spending toward key services, including healthcare, easing access to private savings, and avoiding a credit crunch.

“Assistance from development partners is needed to close the balance of payments gap and to help address the fiscal shortfall. To strengthen confidence in their commitment to the appropriate use of financial support, the authorities have taken strong steps to increase transparency and accountability for COVID-related spending. They have also taken action to implement key structural benchmark measures in the Staff-Monitored Program to underscore their ongoing commitment to the reforms embodied in that program.”

 

More information:

IMF Lending Tracker (emergency financing request approved by the IMF Executive Board)

https://0-www-imf-org.library.svsu.edu/en/Topics/imf-and-covid19/COVID-Lending-Tracker        

IMF Executive Board calendar

https://0-www-imf-org.library.svsu.edu/external/NP/SEC/bc/eng/index.aspx

IMF Factsheet: The IMF's Rapid Credit Facility (RCF)    

https://0-www-imf-org.library.svsu.edu/en/About/Factsheets/Sheets/2016/08/02/21/08/Rapid-Credit-Facility



Table 1. Papua New Guinea: Selected Economic and Financial Indicators, 2016–2025

Nominal GDP (2016):

US$21.1 billion 1/

Population (2016):

7.9 million

GDP per capita (2016):

US$2,568

Quota:

SDR 263.2 million

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Est.

Proj.

(Percentage change)

Real sector

Real GDP growth

4.1

3.5

-0.8

5.0

-1.7

0.3

1.4

3.7

3.8

3.4

Resource 2/

9.8

7.9

-9.3

9.7

-3.0

0.8

1.8

1.7

1.5

1.2

Non-resource

1.5

1.5

3.4

2.9

-1.0

0.0

1.2

4.7

4.8

4.4

Mining and quarrying (share)

9.0

10.2

10.6

10.3

11.8

11.9

12.3

11.9

11.5

11.2

Oil and gas extraction (share)

14.8

16.5

16.8

17.7

12.8

14.5

14.7

14.4

14.0

13.7

CPI (annual average)

6.7

5.4

4.7

3.6

3.7

3.6

4.9

4.1

3.0

2.9

CPI (end-period)

6.6

4.7

4.8

2.9

3.3

4.2

5.0

3.4

2.9

2.9

(In percent of GDP)

Central government operations

Revenue and grants

16.1

15.9

17.8

15.4

14.1

15.6

16.0

16.2

16.5

16.8

Of which : Resource revenue

0.6

0.9

1.7

1.5

0.2

0.8

0.7

0.7

0.6

0.6

Expenditure and net lending

20.9

18.4

20.4

19.5

20.4

20.5

20.1

19.8

19.7

19.8

Net lending(+)/borrowing(-)

-4.7

-2.5

-2.6

-4.1

-6.4

-5.0

-4.1

-3.7

-3.2

-3.1

Non-resource net lending(+)/borrowing(-)

-5.4

-3.4

-4.3

-5.7

-6.6

-5.7

-4.8

-4.4

-3.9

-3.7

(Percentage change)

Money and credit

Domestic credit

24.6

-0.1

-7.9

12.7

6.3

6.2

6.9

6.9

5.9

7.8

Credit to the private sector

7.2

-3.8

7.4

10.5

2.9

3.2

6.0

8.4

7.4

7.7

Broad money

10.9

-0.9

-3.8

9.6

0.6

8.0

9.2

9.2

4.7

6.7

Interest rate (182-day T-bills; period average)

7.4

7.1

7.0

6.5

4.8

4.5

5.7

6.1

5.2

5.0

(In billions of U.S. dollars)

Balance of payments

Exports, f.o.b

8.7

10.4

10.2

11.3

9.6

11.2

11.6

12.0

12.4

12.9

Of which: Resource sector

7.3

8.9

8.9

9.8

8.5

9.8

10.1

10.4

10.8

11.2

Imports, c.i.f.

-1.8

-2.5

-2.5

-3.6

-3.8

-4.2

-4.5

-4.7

-4.9

-5.0

Current account (including grants)

6.1

6.8

6.3

5.5

3.5

4.4

4.2

4.2

4.4

4.6

(In percent of GDP)

29.4

29.9

26.1

22.0

14.6

18.6

17.6

16.5

16.2

16.3

Gross official international reserves

1.7

1.7

2.2

2.0

1.7

1.9

2.0

2.1

2.5

2.9

(In months of goods and services imports)

5.4

5.2

5.2

4.7

3.5

3.5

3.5

3.6

4.1

4.8

(In percent of GDP)

Government debt

Government gross debt

33.7

32.5

36.8

39.0

43.5

45.6

46.9

45.6

44.2

42.6

External debt-to-GDP ratio (in percent) 3/

8.5

8.8

15.2

16.5

21.4

24.3

26.1

26.6

27.0

27.1

External debt-service ratio (percent of exports) 3/

2.1

2.1

2.1

3.5

7.1

4.0

2.6

3.3

3.4

3.3

Exchange rates

US$/kina (end-period)

0.3150

0.3905

0.2970

0.2935

NEER (2005=100, end-period)

101.2

98.6

95.5

96.2

REER (2005=100, end-period)

121.1

122.3

121.8

125.1

Terms of trade (2010 = 100, end-period)

59.6

58.4

57.8

60.6

69.9

75.6

74.0

73.4

72.9

71.5

Nominal GDP (in billions of kina)

65.0

72.5

79.2

84.7

83.2

88.8

94.9

101.8

108.3

115.0

Non-resource nominal GDP (in billions of kina)

49.5

53.1

57.4

61.0

62.7

65.4

69.3

75.1

80.6

86.4

Sources: Department of Treasury; Bank of Papua New Guinea; and IMF staff estimates and projections.

1/ Based on period average exchange rate.

2/ Resource sector includes production of mineral, petroleum, and gas and directly-related activities such as mining and

quarrying, but excludes indirectly-related activities such as transportation and construction.

3/ Public external debt includes external debt of the central government, the central bank, and statutory authorities.

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