Papua New Guinea and ADB

ADB aims to improve infrastructure and the private sector environment; strengthen governance, financial management, and service delivery; and promote inclusivity while building resilience in Papua New Guinea.

Economic forecasts for Papua New Guinea

Figures are based on the latest edition of ADB's Asian Development Outlook, which analyzes economic and development issues in Asia and the Pacific. This includes forecasting the inflation and gross domestic product growth rates of economies throughout the region.


 

Comparative economic forecasts

The latest available economic data for Papua New Guinea compared to countries in the Pacific.


 

Policy Challenge—Reforming the Energy Sector

Unreliable power supply limits economic growth in the main urban areas. The electricity supply is generally poor and blackouts are frequent because of inadequate generation capacity and aging networks. Self-generation and backup generation (entirely dieselbased) are common for business and residential areas and have increased over recent years due to repeated blackouts. Operation and maintenance costs of power generation are high, but efficiencies low. The power utility, PNG Power Limited (PPL), has deprioritized maintenance on its network and generation assets because of the utility’s deteriorating financial condition. This is driven by low tariffs, last adjusted in 2013, which barely recover PPL costs, and high technical and commercial losses. Aging network infrastructure leads to high losses, while electricity theft, illegal connections, and a low bill collection rate leave PPL with revenues well below expenses.

PNG lacks a national government-led plan for energy sector development. PPL instead conducts internal generation and grid planning that is neither backed nor aligned with the national regulator or the government’s national budget financing plan. Since 2013, private sector participation has been allowed in power generation. As a result, independent power producers (IPPs) have made ad hoc investments that are not coordinated with grid development. Although the government set a target in 2010 to achieve 70% electrification by 2030, less than 20% of the population can currently access electricity.

The transition from diesel generation to cheaper and cleaner renewable energy resources is limited. Although PNG has abundant renewable energy resources—hydropower, solar, wind, biomass, and geothermal energy—these have not been fully explored or utilized. Hydropower has been the backbone of the country’s power supply, but its role has diminished over the years, with limited new capacity added. Despite excellent solar potential and high returns on investments for many locations in the country and good alignment with peak power demand during the day, photovoltaics have not been deployed at a utility scale. Legal barriers and restrictions on behind-the-meter renewable energy installations block the development of private firms’ solar photovoltaic. Hence, rooftop photovoltaic panels have been limited to small off-grid applications.

Reforms in three key areas are needed to improve power generation and promote growth. The first is to restore the financial sustainability of the power sector by adjusting tariffs and improving the utility’s operations. The regulator needs to establish a process and methodology for independent annual tariff adjustments, while considering the effects on poor and vulnerable households. PPL also needs to develop a comprehensive revenue strategy to reduce commercial losses and public sector payment arrears, and to connect more commercial customers. Second, there is a need to create a national transition plan to a low-carbon power sector, including guidelines to prioritize and fund power sector infrastructure. The government further needs to issue national regulations related to planning, implementation, and monitoring. This includes removing legal barriers and restrictions to renewable energy installations. And third, reforms are needed to enable efficient private sector involvement in the power sector. This requires issuing regulations on the process of competitive bidding for IPP investment. Open, transparent, and competitive tenders with bankable power purchase agreements will attract private sector investment, while promoting technical efficiency and cost-competitiveness.

More resources

Asian Development Bank and Papua New Guinea: Fact Sheet

Asian Development Bank and Papua New Guinea: Fact Sheet

The Fact Sheets summarize ADB's partnerships with member economies, providing key facts and figures and an overview of activities and future directions.

Asian Development Outlook (ADO) April 2024

Asian Development Outlook

The Asian Development Outlook analyzes economic and development issues in developing countries in Asia.

Key Indicators for Asia and the Pacific 2023

Key Indicators

The Key Indicators for Asia and the Pacific publication presents data regarding the economic, financial, social, and environmental situations in a broad range of countries across the region.

Basic Statistics 2024

Basic Statistics

The Basic Statistics brochure presents data on selected social, economic, and SDG indicators such as population, poverty, annual growth rate of gross domestic product, inflation, and government finance for economies in Asia and the Pacific.