Papua New Guinea’s government debt stood at 51.10% of GDP in 2024, down from 51.90% in 2023, according to figures published by the PNG Department of Treasury. The International Monetary Fund and World Bank still classify the country at high risk of debt distress.
Those two facts have coexisted for three years, and the reason is a single payment date.
The consolidation is real
The fiscal deficit narrowed to 2.4% of GDP in 2025 from 3.3% in 2024, IMF mission chief Nir Klein said in the Fund’s March 31, 2026 statement announcing a staff-level agreement on PNG’s sixth programme review. Klein attributed the improvement mainly to higher resource revenues and rationalisation of current spending, and noted that capital expenditure as a share of GDP rose for the first time since 2021.
Consolidation continues into the current year. Klein put the 2026 projected deficit at 1.1% of GDP, achieved through additional revenue mobilisation and contained growth in current expenditure.
The programme metrics support the government’s execution record. The IMF’s Executive Board, completing the sixth reviews on June 8, 2026, confirmed that all quantitative performance criteria and indicative targets for end-December 2025 and all indicative targets for end-March 2026 were met, and that all six structural benchmarks due were met or implemented with delay.
Growth has held up alongside the adjustment. Real GDP expanded 5.6% in 2025 from 3.9% in 2024, according to the World Bank’s April 2026 Macro Poverty Outlook, which credits the Porgera gold mine reaching 75% of production capacity and improved foreign currency access under the Bank of Papua New Guinea’s crawl-like exchange rate arrangement and FX auctions. The IMF projects growth easing to 3.8% in 2026.
Debt is tracking down on the same path. Trading Economics econometric models project the ratio at 46.50% of GDP in 2026 and 45.00% in 2027, and the Joint Bank-Fund Debt Sustainability Analysis states the present value of the debt-to-GDP ratio sits below its threshold across the entire projection horizon on a clear downward trend.
The rating that has not moved
None of that has changed PNG’s classification. The Joint Bank-Fund Debt Sustainability Analysis rates the country at high risk of external debt distress and high overall risk of debt distress under the Low-Income Country Debt Sustainability Framework, with weak debt-carrying capacity. The same analysis grades the debt itself sustainable.
The distinction is between stock and schedule. PNG does not owe too much. It owes an awkward amount at an awkward moment.
The DSA identifies the driver directly: external debt risks are elevated due to liquidity risk associated with the bullet payment on the existing Eurobond in 2028, alongside higher official bilateral and multilateral debt service payments in the first half of the forecast horizon.
US$500 million, due in one instalment
PNG issued a US$500 million Eurobond in 2018. It matures in 2028 as a single bullet payment.
The IMF’s 2024 debt sustainability analysis records that PNG’s own authorities agreed the redemption of that bond, alongside higher interest rates relative to history, ranks among the key risks to the debt profile. The same document notes the authorities attributed the underlying debt build-up to the large financing requirements deployed against the economic effects of the COVID-19 pandemic.
The Joint Bank-Fund analysis is specific about where the strain lands. Debt service indicators show a small breach of threshold in 2026 and a relatively large breach in 2028, when the bullet payment falls due. The authorities do not plan to roll the bond over, at least at the point of that assessment. After 2028 the indicator returns close to threshold, with any further breaches short-lived and confined to a single year.
That profile describes a country that is solvent and briefly illiquid, and the rating agencies of the multilateral system price the second condition as seriously as the first.
Half the debt is domestic, and it is getting shorter
The composition compounds the timing problem. Approximately half of PNG’s debt is domestic, according to Coface’s country risk assessment, with 53% of external debt held on concessional terms by multilateral creditors including the IMF, World Bank and Asian Development Bank. The remainder sits with bilateral creditors, mainly Australia and China, and with private investors holding roughly 2% of GDP through the 2028 Eurobond.
Total external debt stocks reached US$12.85 billion in 2024, per World Bank development indicators.
The domestic half carries its own deterioration. The IMF’s 2024 analysis records that PNG’s authorities reported interest costs on domestic securities rising over the preceding year, and average maturities on new issuances shrinking, as the market adjusted to lower liquidity conditions.
Shorter maturities at higher rates increase rollover frequency. The Joint Bank-Fund analysis states domestic debt vulnerabilities are elevated and contribute to persistent breaches of the present value of overall debt to GDP.
The government has identified the exposure. PNG’s 2025 Debt Financing Plan, published by the Department of Treasury, sets out an objective of lessening reliance on Treasury Bills to mitigate refinancing and rollover risk, and identifies K2,188.5 million in net external budget support loans as part of the financing mix.
The strategy on paper
PNG’s 2024-2028 Medium Term Debt Strategy, published by the Department of Treasury, states its main objective as securing the lowest possible financing cost for the annual budget while managing financial risks and developing the domestic debt market.
Treasury selected an approach the document labels Strategy 3, on grounds that it extends debt maturities, reduces short-term obligations, and concentrates on fixed-rate debt to limit exposure to interest rate movement. The same document includes a dedicated retiring plan for the US$500 million sovereign bond maturing in 2028.
The IMF’s 2024 analysis records the authorities’ stated intent to continue substituting costly financing with concessional financing from multilateral and bilateral partners.
Concessional substitution is the mechanism that resolves this. It is also slow, and it depends on partners continuing to lend on those terms.
What the Fund has actually paid out
The IMF’s Executive Board approved combined disbursements of about US$163 million on June 8, 2026, releasing SDR 60.53 million, roughly US$82 million, under the Extended Credit Facility and Extended Fund Facility, and SDR 59.22 million, roughly US$81 million, under the Resilience and Sustainability Facility.
That figure came in below the March projection. Klein’s staff-level agreement statement of March 31, 2026 had indicated the completion of those reviews would allow US$82 million under the ECF and EFF and up to US$134 million under the RSF, giving PNG access to about US$216 million in total. The RSF released roughly US$53 million less than the upper figure flagged ten weeks earlier.
The arrangements themselves are substantial. The ECF and EFF were approved on March 22, 2023 in an overall amount equivalent to SDR 684.32 million, or 260% of PNG’s quota, to address a protracted balance of payments need manifesting in foreign exchange shortages. The 24-month RSF arrangement was approved in 2024 for SDR 197.4 million.
Cumulative disbursements under the programmes reached SDR 622.48 million, about US$851 million, following the fifth reviews completed on December 12, 2025.
The arithmetic of 2028
PNG’s fiscal consolidation and its debt distress rating measure different things. The consolidation measures the flow. The rating measures a specific payment on a specific date against projected foreign currency availability.
Meeting the deficit path does not retire the bond. A country running a 1.1% deficit in 2026 and a balanced budget in 2027, the target Klein’s statement attributes to the authorities, still arrives at 2028 owing US$500 million in one payment, in foreign currency, with a Eurobond market that will price PNG on its rating rather than its trajectory.
Three variables decide the outcome. Whether Treasury’s retiring plan accumulates sufficient reserves against the maturity. Whether concessional substitution advances far enough to reduce the surrounding debt service load the DSA flags for the same period. Whether the FX position, which the World Bank credits BPNG’s auctions and crawl-like arrangement with improving, holds through a year in which the government must source half a billion US dollars.
Inflation runs against that. Headline inflation rose from 0.6% in 2024 to an estimated 4.4% in 2025, per the World Bank’s April 2026 outlook, with the IMF projecting 4.8% in 2026 as higher import costs are partially offset by goods and services tax relief extended through end-2026.
The gap between the ratio and the rating
Papua New Guinea has done what fiscal consolidation asks. Deficits are down from 3.3% to a projected 1.1% of GDP in two years. Every programme target through March 2026 has been met. Debt is at 51.10% of GDP and the present value measure sits below threshold across the forecast horizon on a downward trend.
The distress rating has not moved, and it will not move on the strength of the ratio alone. The Joint Bank-Fund analysis attached the rating to a bullet payment, and bullet payments are indifferent to trend lines.
