An update of recent events: the Papua New Guinea economy

Abstract

The Papua New Guinea economy has a record of economic instability triggered by fiscal imbalances. 1999 fitted the established pattern, with a failure to secure external funding risking currency and fiscal crisis by mid year. The Skate Government pursued extreme solutions to the problem, including an expensive Eurobond issue and the provision of diplomatic recognition to Taiwan. But the emergence of the Morauta Government saw a more conventional solution to the government's fiscal difficulties. Support from the international community appears to have avoided another round of macroeconomic instability, but much remains to the done by the government to lock in the IMF and the World Bank and to provide the economic environment required to stimulate a stressed private sector.