Recent encouraging indicators will reinforce the cautious optimism being felt in Papua New Guinea’s business circles. But international factors – notably the prospect of a prolonged international tariff war – are a reason to remain watchful.

Port Moresby’s Waigani district, showing the Department of Prime Minister and NEC building, Sir Manasupe Haus (centre). Credit: BAI

The results of the 2025 PNG 100 CEO Survey, released last month, not only recorded a slight improvement in business confidence among PNG’s largest companies but also suggest that the number one issue for business – the country’s ongoing foreign exchange (FX) shortages – is becoming less chronic.

The minutes from the March 2025 meeting of the Bank of Papua New Guinea’s (BPNG’s) newly-constituted Monetary Policy Committee – the new independent arbiter of the country’s interest rates and money supply – confirm this.

The minutes note the country’s backlog of FX orders has declined from approximately K2 billion to around K700 million since the central bank instituted a crawl-like exchange rate with the support of the International Monetary Fund (IMF) in early 2024. They also noted that the clearing time for outstanding orders has reduced from one-to-three months to less than a week in some cases – an encouraging trend.

At the same time, inflationary pressure – a feared consequence of the kina’s depreciation – has notably ‘moderated’ from the last quarter of 2024, although it is the BPNG’s view that the kina remains over-valued and will continue to decline in value against the US dollar.

Another tick from the IMF

The IMF’s successful visit early this month to PNG looks set to see it release a fourth round of funding in support of FX and other reforms.

“Despite a challenging environment, Papua New Guinea’s performance under the IMF-supported program over the past two years has been strong,” noted the IMF’s mission chief for PNG, Nir Klein.

“The authorities have sharply reduced the fiscal deficit and adopted important amendments to the Income Tax Act—a major milestone in the simplification of tax policies; introduced critical governance enhancements to the central bank and strengthened its operations, leading to improved access to foreign exchange and mopping of excess liquidity; and supported the operationalisation of the anti-corruption framework.”

The IMF is predicting GDP growth of 4.7 per cent this year, while the Asian Development Bank ‘s most recent forecast is for 4.3 per cent.

Tariffs

There are, of course, new uncertainties to contend with. As readers will have noted, PNG was not excluded from Donald Trump’s tariffs, with a flat 10 per cent being immediately applied to all PNG exports to the US on 2 April. Prime Minister James Marape has subsequently confirmed PNG will not be reciprocating.

What impact will these tariffs have on PNG businesses?

On paper, the US has a massive trade surplus with PNG.

According to BPNG figures, PNG exported K394 million worth of goods to the US in 2023, the last full year for which we have data. The US was only PNG’s 12th largest export market in 2023, taking less than 1 per cent of all PNG’s exports (comparable in volumes to the United Kingdom).

By contrast, the US sold PNG K2.587 billion worth of goods over the same period and was PNG’s second largest supplier of imports, after Australia.

Indirect impacts, of course, could be more significant, especially if the trade war between the US and China is prolonged.

In its first World Economic Outlook since the Trump tariffs were introduced, the IMF has revised down its expectations for global growth. The Asian Development Bank is also now warning that the Asia-Pacific region “now faces a complex economic landscape, with increasing trade tensions, policy shifts, and geopolitical conflict”.

PNG’s four largest export markets have all been hit with tariffs too: China (an eye-watering 134 per cent), Japan (24 per cent, paused until early July and 10 per cent in the meantime), Singapore (10 per cent) and Australia (10 per cent).

Given PNG is less tied into global capital flows than developed countries, it’s by no means clear how severely it will be affected. Indeed, as a gas and gold exporter (commodities both priced in US dollars), it may benefit from a stronger US dollar, as it has benefitted from higher energy prices since the Ukraine War.

Watch this space.