Paul Barker, Executive Director of industry think-tank the Papua New Guinea Institute of National Affairs, provides his personal take on PNG’s economic journey since independence.

Independence in 1975 saw the introduction of PNG’s own currency, the kina. In PNG’s early years, the Panguna copper mine was critical to fund the country, as was the ‘hard kina’ policy – which pegged the kina to a basket of its main trading currencies.

The Institute of National Affairs’ Paul Barker

In the late 1970s, strong coffee prices gave a stimulus to agriculture and led to a substantial increase in smallholder coffee production.

Panguna’s closure in 1989 led to a nine per cent drop in GDP and a 35 per cent drop in exports revenue. While several resources projects started or were negotiated in the 1990s, the cost of the closure was higher than the benefits.

Despite lower revenue, expansionary budgets in 1993 and 1994 led to a fiscal crisis and a change of government.

PNG’s forex reserves were depleted by 1994, leading to a 12 per cent devaluation of the kina, followed by a floating of the currency. Despite high initial inflation, this policy put PNG back on track to economic growth, and the market-driven exchange rate remained until 2016.

Economic troubles returned in 1997, with a cyclone followed by a severe El Nino drought. These, combined with political instability triggered by the Sandline Crisis, saw the balance of payments revert to deficit.

While GDP began growing again over the next two years, thanks to new resource projects going into full production and higher agricultural commodity prices, government finances went back into deficit due to weak expenditure control.

By decade’s end, the World Bank and others were invited into PNG to assist with the country’s finances and support Prime Minister Sir Mekere Morauta’s reform measures.

Morauta only got so far in his three years, but privatisation of the PNG Banking Corporation (now BSP) and reforms to superannuation and the central bank were key achievements.

This was followed by several years of prudent fiscal management, including the introduction of the Fiscal Responsibility Act in 2006. This saw debt levels fall from 70 per cent to 24 per cent of GDP by the end of the decade.

There was a big boost in global commodity prices during the 2000s, peaking at the time of the global financial crisis in 2008.

At around the same time, the creation of the PNG LNG project happened remarkably quickly. The plan shifted in the mid-2000s from creating a gas pipeline to Queensland to exporting LNG to the rest of the world.

While the construction phase provided a big economic boost, and production boosted GDP, this was partly offset by a major drop in oil prices and the large debt to repay.

During the covid era, PNG didn’t fare as badly as some neighbours, because it didn’t depend heavily on tourism, and couldn’t have a strict lockdown due to its informal economy.

Lastly, while the Ukraine war impacted energy and food prices, it has benefitted PNG as an energy producer.

This article was first published in the 2025 Business Advantage PNG annual edition.