Converting Resource Wealth into Human Capital: Rebalancing Public Finances for Sustainable and Inclusive Growth and Jobs. Papua New Guinea Public Finance Review

Overview & Synopsis

The Government of Papua New Guinea has ambitious goals: to grow the economy to K200 billion by 2030, create one million jobs, and achieve a balanced budget by 2027. Meaningful progress has been made, with sustained fiscal consolidation significantly reducing the fiscal deficit from its COVID-era peak. However, additional efforts will be needed to fully finance the country’s human capital needs and broader development priorities. Under ambitious scenarios, revenue reforms could yield around 5.8 percent of gross domestic product (GDP) complemented by expenditure efficiency gains of up to 1.5 percent of GDP. Achieving this will require a dual strategy. First, Papua New Guinea will need sustained improvements in domestic revenue mobilization, particularly from the resource sector, with transparently and strategically negotiated future resource projects playing a key role. Second, better allocation, execution, and accountability of public spending across all levels of government are needed to ensure public funds translate into frontline service delivery. These reforms are critical, given that chronic underinvestment in education, health, and social protection has resulted in weak human capital outcomes, constraining productivity, job creation, and long-term growth. Social sector spending needs to increase to at least 10 percent of GDP, and, if fully implemented, the reforms will generate sufficient fiscal space to finance additional investments of about 4.5 percent of GDP. As a first step, there is scope to reallocate a significant share of the fiscal surpluses projected from 2027 onward toward human capital investments. Together, these measures can help convert resource wealth into human capital while strengthening macroeconomic stability, attracting investment, and supporting job creation.