PNG—Social and political instability threaten positive economic outlook

PNG entered 2024 with a broadly positive economic outlook. In November, the IMF board passed the first-six monthly review of PNG’s IMF program, with PNG meeting all quantitative performance criteria as well as structural benchmarks (albeit one with a slight delay). As many IMF programs have struggled at this hurdle, it is encouraging that the board judged PNG’s performance as strong, its fiscal consolidation plan on-track, and its authorities as committed to reforms. As foreign exchange shortages remain a leading business concern, it is also encouraging that PNG progressed its commitment to gradually depreciate the kina. The IMF’s first review was followed, in December, by the re-opening of Porgera gold mine in Enga Province, which poured its first gold in almost four years in February. The IMF predicts that, on the back of this opening, growth is likely to increase to 5% in 2024 (from 3% in 2023). Growth will also be supported by a Final Investment Decision on the US$12 billion Papua LNG project. Despite delays, Total remains ‘confident’ that landmark will be reached this year.

Realisation of this positive outlook, however, could be undermined by the significant economic and security challenges PNG has experienced in the first quarter of this year. Rioting erupted in Port Moresby in January while security forces were protesting over a pay issue. ‘Black Wednesday’ resulted in 22 deaths and estimated losses to businesses of at least PGK1.27 billion (1% of GDP). Meanwhile, the Highlands have long experienced periodic tribal conflict over land and resource distribution, but access to high-powered weaponry has made disputes more deadly. A roadside ambush in Enga province resulted in 49 deaths in February. Further, an ongoing fuel crisis escalated after Puma Energy, PNG’s major supplier, advised that ‘no further supplies of fuel will be available’ until further notice. Mobil has increased supply and major Puma customers are pursuing workarounds, while the PNG Government pursues long term solutions.