Regions and Countries

	Table of Contents
p. 42 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific Cook Islands Fiji Islands Kiribati Marshall Islands Federated States of Micronesia Nauru Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu

Papua New Guinea

Economic performance

The rate of real GDP grew by 0.8 percent in 2000—along with 0.9 percent growth in agriculture, forestry, and fisheries; 7.9 percent contraction in mining; and 2.0–5.0 percent growth in other sectors. The trade balance improved in 2000 largely because of increased exports. This led to an overall balance-of-payments surplus of 5.7 percent of GDP, despite a large capital account deficit. In mid-2000, foreign exchange reserves were equivalent to 2.7 months of imports. There was considerable variability in the exchange rate during the year. In 2000, year-on-year inflation was 17.9 percent.

Domestic policies: The budget deficit in 2000 was about 1.8 percent of GDP, compared with a deficit of 2.6 percent in 1999. Total public debt in 2000 was 60.8 percent of GDP, compared with 63.1 percent in 1999 and 65.8 percent in 1998. Growth of the money supply slowed considerably in 2000, reflecting weaker economic growth and tighter monetary policy. Despite the tight monetary stance, interest rates declined in 2000, indicating lower inflationary expectations and ample liquidity in the banking system. The Government, which assumed office in July 1999, restored macroeconomic stability in a relatively short time, and is implementing a comprehensive structural reform program. The key objectives of the reform program are improving governance and public sector performance, sustaining macroeconomic stability, and removing barriers to investment and economic growth. A new central bank act came into effect in June 2000, which introduces price stability as the primary goal for monetary policy and increases independence for the central bank.

ADB operations

Operational strategy: ADB’s operational strategy for Papua New Guinea focuses on reducing poverty through improved governance, private sector development, and improved social indicators. At the Government’s request, ADB took the lead in improving public sector financial management and assisted the Government in designing and implementing a public sector reform program that focuses on improving performance and governance. Developing longer-term, income-earning opportunities is a key concern that is being addressed by support for private sector development. In addition, ADB is supporting sector policy enhancements, market strengthening, and market access improvements, notably through transport infrastructure investments. The third strategic concern is to improve social indicators, especially for women and the poor, with emphasis on the rural areas.

Policy dialogue: Policy dialogue with the Government continued on the underlying issues of development management, improving management of the road and maritime transport subsectors, enhancing microfinance services, sustaining town water supply and sanitation, and strengthening public sector management. The need for rational and evidence-based decision making continued to underline dialogue.

Loans and technical assistance: In 2000, ADB approved three loans totaling $45.5 million for maritime navigation aids system, microfinance and employment, and provincial towns water supply and sanitation. ADB also approved eight technical assistance projects totaling $3.3 million: four to provide advisory services and four to prepare loan projects in coastal water fisheries, agro-industry, and community water transport.

Project implementation: Since joining ADB in 1971, Papua New Guinea has received 53 loans, of which 14 were active at the end of 2000. Contract awards totaled $23.1 million, bringing the cumulative figure to $525.1 million. The contract award ratio was 15.3 percent, lower than the ADB-wide average of 21 percent. Disbursements during the year totaled $13.0 million, bringing cumulative disbursements to $520.8 million. The disbursement ratio was 8.8 percent, lower than the ADB-wide average of 20.5 percent, attributed to the approval of large projects in late 1998 and 1999.

Ongoing projects were reviewed in 2000 to ensure continuing priorities; as a result, outstanding loans worth $6.0 million were cancelled. The closure of two loans during the year resulted in further cancellation of $7.4 million. ADB, in collaboration with the Government, continued measures to resolve problems in project implementation. ADB reemphasized the importance of strict compliance with its procurement and anticorruption requirements.

   

Back Nauru	Next Samoa