Latest update November 8th, 2024 1:00 AM
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Oil-rich Papua New Guinea gets US$363M from IMF for COVID-19
– but loses more annually to corruption
Papua New Guinea has made billions of dollars on its oil and gas resources since the 1990s. But instead of saving that money for a rainy or for unprecedented circumstances such as the COVID-19 pandemic, those entrusted to protect the people’s wealth, allowed a selected few to embezzle it. According to global watchdog, Transparency International, the cost of corruption to the nation was estimated to be above US$1.4 billion in 2015. And in 2016, former Prime Minister Mekere Morauta cited estimates of more than US$429 million being lost to corruption annually.
As a result of this wanton abuse on the national coffers, Papua New Guinea was left with no choice but to turn to the International Monetary Fund (IMF) for emergency funding to address the COVID-19 pandemic. Just a few days ago, the Executive Board of the IMF announced that it approved a disbursement to Papua New Guinea under the Rapid Credit Facility to the tune of US$363.6 million to help cover urgent balance of payments needs.
IMF officials noted that the COVID-19 pandemic is hitting the country’s economy hard, through export losses and the impact of measures to mitigate transmission of the virus. Kaieteur News understands that the crisis erupted as the government was beginning to implement wide-ranging reforms under a Staff-Monitored Programme (SMP). (A SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic programme. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.)
The IMF said that the authorities of Papua New Guinea have acted forcefully to prevent a significant outbreak of the COVID-19 virus. While these efforts have been successful to date, the Fund said that 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. It was also noted by the financial institution that lower resource export earnings have led to a large balance of payments shortfall of around four percent of Gross Domestic Product (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 Fund said that the authorities’ economic policy response has focused on reallocating spending within the budget envelope towards health care 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 of Papua New Guinea have re-affirmed their commitment to reform while noting that the nation’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.
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