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Country Highlights

Papua New Guinea: Impact of Infrastructure Development

Infrastructure development plays a crucial role in shaping Papua New Guinea’s (PNG) economic landscape. Compared to developed economies, the physical stock of infrastructure assets in PNG is insufficient to deliver the economic and social services needed to drive faster economic growth and improve human development. The country faces significant barriers in providing economic and social infrastructure, with transport infrastructure (road/water/air) and services restraining inclusive economic growth. Additionally, PNG’s planned spending on infrastructure drops away significantly over the forward estimates, posing challenges to the nation’s public asset base growth. The lack of a national or sub-national infrastructure plan and regulated requirement for environmental impact assessment further highlight the infrastructure challenges in PNG.

To achieve stronger and more inclusive economic growth, PNG should seek to maintain greater economic stability, boost productivity, and nurture human capital. Challenges for macroeconomic stability and the high risk of debt distress could negatively affect the country’s economic growth. The government must urgently deliver comprehensive programs to improve training, education, and employment opportunities for its large population of young people to achieve and sustain stability and productivity. Stability and productivity are critical for PNG to generate strong and sustainable economic growth, and expanding economic opportunities for all of its population, notably for its growing number of young people and women, is essential.

Investment in infrastructure is high in Papua New Guinea, at 5.4% of GDP per annum. However, the country faces challenges such as difficulties in accessing foreign exchange, power and water supply disruptions, and issues in the banking sector. The lack of access to foreign exchange is identified as the most critical impediment to doing business in PNG. The COVID-19 pandemic may impact these efforts, and the government’s mismanagement of public funds is also a factor that is crippling the economy of Papua New Guinea. Addressing these challenges and pursuing policy reforms that ensure equal economic opportunities for all Papua New Guineans is essential for the country’s economic development.

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