Papua New Guinea: Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Papua New Guinea (PNG) remains at high risk of debt distress under the Low-Income Country Debt Sustainability Framework (LIC-DSF), with weak debt-carrying capacity.1,2 External debt risks are elevated due to liquidity risk associated with the bullet payment on the existing Eurobond in 2028 and higher official bilateral and multilateral debt service payments in the first half of the forecast horizon. Domestic debt vulnerabilities are also elevated contributing to persistent breaches of the PV of overall debt to GDP ratio. The ongoing fiscal consolidation helps address debt vulnerabilities, while the risks of external and overall public debt distress are assessed as high. Over the medium-term, public debt would trend downward, while the breaches of liquidity indicators can be addressed by debt management operations and enhanced revenue generation. The Debt Sustainability Analysis (DSA) suggests that PNG is susceptible to trader elated and contingent liabilities shocks, as well as climate change, underscoring downside risks to the public debt outlook. Fiscal consolidation, structural reforms fostering private sector growth, and climate related adaptation and mitigation measures would lower the risk of public debt distress and support