The Chair of the Monetary Policy Committee and the Governor of the Bank of Papua New Guinea (BPNG), Elizabeth Genia, hosted a breakfast presentation on the 2025 Economic Outlook of PNG at the Royal Papua Yacht Club on April 9.
Genia spoke on the March 2025 Economic Outlook, outlining sweeping changes in monetary policy, economic trends, and financial sector reforms.
Before a distinguished audience of government officials, international development partners, and members of the business and diplomatic community, Governor Genia opened with a strong message of inclusivity and reform.
A central highlight of her speech was the formal introduction of the newly operational Monetary Policy Committee (MPC), a key reform under PNG’s International Monetary Fund (IMF) program.
The MPC was established through amendments to the Central Banking Act in December 2024 and activated with member appointments in February 2025. It has assumed responsibility for setting the nation’s monetary policy, previously the remit of BPNG’s Board.
Governor Genia introduced the new MPC members: Mr. Scott Roger, a seasoned economist formerly with the IMF and Monetary Authority of Singapore; Mr. Dairi Vele, a returning Bank board member; and Professor David Kavanamur, Managing Director of Kumul Consolidated Holdings.
“We are grateful for the valuable contribution of our new MPC members… and their ongoing commitment to responsibly formulating monetary policy,” Genia said.
She also acknowledged outgoing members Mr. Mark Baker and Mr. Michael Reddell for their service, noting their continued involvement on the Bank's Board.
Genia reviewed monetary policy decisions made over the past six months, notably the increase of the Kina Facility Rate (KFR) to 4.0% in September 2024, up from its historic low of 2.0% earlier that year.
While the KFR remained steady into 2025, Genia emphasized that tightening continued via the Cash Reserve Requirement (CRR), which had risen from 10% to 12% mid-2024 before being revised down to 11% at the March 2025 MPC meeting.
Genia clarified: “The decision to adjust the CRR did not signal an easing in monetary policy, and it was a necessary step to address the uneven distribution of liquidity within the banking system.”
Private sector lending remained largely unaffected by the tighter liquidity, though government borrowing costs surged, with 12-month Treasury Bill yields rising from under 5% in June 2024 to over 8% by year’s end.
The MPC also resumed its crawl-like exchange rate regime, maintaining the interest rate corridor around the KFR and moving toward greater reliance on indirect instruments like central bank bills.
Demonstrating a strong push for transparency, Genia showcased the new format of the Monetary Policy Statement. Now required by law under the amended Central Banking Act, the MPC must publish detailed decisions, including voting records and rationales within one day of each meeting.
“Transparency and accountability are at the heart of what the Monetary Policy Committee is aiming to achieve,” Genia said.
The Bank has also committed to regularly publishing minutes and projections from its Economic Outlook, with the March 2025 update revealing key inflation and GDP trends.
Inflation Trends: Domestic Weakness Tempering Prices
Genia elaborated further with details of how non-tradable (domestic) inflation had offset tradable inflation through the latter half of 2024, contributing to relatively stable headline inflation.
“Weakening demand and a softer domestic economy were the main contributing factors,” Genia explained, pointing to falling telecommunications prices and a broader slowdown in non-mineral sectors.
While core inflation measured by trimmed mean and exclusion-based indices remains under control, Genia warned of external risks.
“We are expecting inflation to remain relatively well contained, but the caveat, of course, is the recent introduction of tariffs in the US,” she said.
The Governor reaffirmed the Bank’s strategy to address the ongoing depreciation of the Kina. “What is important is that we are using this as a mechanism to allow the Kina lower, in a measured, and gradual way, until we see some improvement, what economists call ‘equilibrium’.”
Positive signs are emerging, with the backlog of foreign exchange orders falling from over PGK 1 billion in August 2024 to just over PGK 100 million in early 2025—a shift attributed to improving FX inflows and better liquidity management.
The Bank projects 4.0% real GDP growth in 2025, driven by improved mining operations, resumed output at the Porgera mine, and early works on the Papua LNG project. Agriculture, forestry, and fisheries are also expected to perform strongly, aided by Kina depreciation.
Growth is projected to accelerate by 5% to 6% over the medium term, particularly with the commencement of the Papua LNG construction phase in 2026 and gains in the non-mineral sector.
“Despite expectations of moderating global commodity prices, the depreciation of the Kina is anticipated to boost export earnings,” Genia noted.
Genia also spoke on geopolitical risks, specifically the potential global fallout from new US tariffs. While PNG’s LNG exports are largely insulated due to forward contracts, concerns remain.
“If equity markets continue to sell off and we see increased margin calls, we could see vulnerabilities emerge in global banking,” she warned, adding that this could impact financing for Papua LNG.
A Grave Warning on AML Compliance and Grey Listing
The Governor took the opportunity to warn attendees on PNG’s risk of being “grey listed” by the Financial Action Task Force (FATF), following a damning Mutual Evaluation Report in October 2024. She said PNG scored extremely low ratings on both effectiveness and technical compliance, indicating substantial shortcomings.
Although commercial banks were praised for meeting international Anti-Money Laundering (AML) standards, Genia emphasized that law enforcement and inter-agency coordination remain weak.
“If we don’t address these problems and address them quickly we will end up on the grey list, and that is a place where no country wants to find itself,” she warned.
“Let’s address these challenges and take action now while we can. In a few short months, it will be too late,” she said, noting that a grey listing would damage PNG’s international reputation, increase transaction costs, and deter foreign investment.
