On Monday 6th November we heard on interesting presentation from Mr. Sohrab Rafiq, the Country Manager for the International Monetary Fund. In March 2023 the PNG government entered into a loan for USD 918 million over a 38-month period.
The loan is to support the government’s reform agenda. The loan is disbursed in tranches after 6 monthly periodic reviews.
The loan is at a concessional rate with repayments over a 10-year period starting of 2025.The advantage of on IMF program is that other multilateral and donor countries will be more willing to lend to PNG conditionally upon the success of the IMF program. The IMF program is based on 3 pillars:
Sustainable and durable fiscal consolidation. At the moment PNG has high levels of public debt at around 50% of GDP. PNG is classified as at high risk of debt distress.
Towards a more effective monetary policy framework and address the foreign exchange shortages;
Operationalizing the anti-corruption framework.
Revenue reforms under the program include;
(a) Implement the Tax Administration Act
(b) Amendments to the Income Tax Act
(c) implementation of the non-tax revenue charges
The IMF in their report had assessed the Kina as being overvalued by around 13% compared to the US dollar. The monetary policy framework they are pursuing with the Bank of PNG and the Treasury Department include:
· Enhancing the effectiveness of monetary policy;
· Move to a market clearing exchange rate and to full convertibility over the duration of the program;
· Better governance by operationalizing the ICAC to ensure fiscal transparency.