Managing fiscal challenges in contemporary Papua New Guinea

The rising budget deficits and associated increases in public debt confronting the Government of Papua New Guinea make it difficult for that Government to comply with the legislated debt ceiling of 30 percent of GDP within the foreseeable future. In these circumstances focusing policy on containing debt to the legislated level could compromise both fiscal sustainability and developmental objectives. Rather, I argue that the Government can use public investments funded with concessional loans to raise GDP, improve developmental outcomes, and return public finances to a path of fiscal sustainability.