Economic constraints


PAPUA New Guinea has an import-dependent economy.
The country needs to import goods and services for domestic production and consumption to keep the economy running to generate employment, income, consumption, and tax revenues.
How much PNG can import depends on the amount of foreign currency (foreign exchange) it earns and has in stock (reserves).
Foreign exchange comprises of our stock of earnings to date and current period income denominated in other currencies such as the US dollar, Australian dollar, Japanese yen, euro and British pound.
Foreign exchange is income that PNG earns from the export of its goods and services like tuna, cocoa, coffee, tea, gold, gas and copper.
It pays for imports of goods and services in foreign currency.
However, the country’s ability to export and generate foreign exchange has been heavily influenced and undermined by both external and domestic factors.
The main external factor is the volatile international commodity prices which PNG does not have any control over because prices are given.
Recent years have seen a significant collapse in prices, which have severely affected PNG’s export earnings.
The main domestic factor is the high cost of doing government and private business in PNG.
The key production input factors that contribute to the high operating and investment costs are the freight and passenger costs of land, air and sea transportation, communications, domestic financing and insurance, unreliable electricity supply, lack of domestic marketing and logistic infrastructure, low productivity and high labour costs, and the failure of the Government to continuously fund the development and maintenance of land, sea, and air transportation infrastructures and research and development capacity in the country.
These external and domestic factors combined with favourable tax concessions granted to mining, petroleum, and gas companies, and the adverse effects of natural disasters due to the destruction of the natural
environment and emissions resulting in global warming, have seriously affected PNG’s exports and foreign exchange earnings in recent years.
They explain why PNG has been facing a foreign exchange crisis and how that crisis has been affecting businesses for some years now.
PNG needs good leadership, management, and governance to develop and support our exports at competitive cost to sustain economic activities.
These will enable the country to progress and achieve its objectives of inclusive and sustainable economic development and growth.

Concerned citizen