15/02/2026
Papua New Guinea’s financial management and the risks of Graylisting.
●Why Graylisting Happens?
- Financial Action Task Force (FATF) graylisting usually occurs when a country is seen as having deficiencies in anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks. It signals to global banks and investors that transactions with that country carry higher risk.
- Continuous borrowing from institutions like the IMF and global banks, without transparent and effective management, can exacerbate concerns about fiscal discipline and governance.
- If borrowed funds are not directed toward productive, revenue-generating projects, the state risks accumulating liabilities without strengthening its economic base.
●The Core Issue
- Misallocation of funds: Using loans for recurrent expenses (like covering operational deficits or inefficient public enterprises) doesn’t create long-term value.
- Debt sustainability: If debt grows faster than GDP, repayment becomes harder, and lenders lose confidence.
- Investor perception: Poor management of borrowed money undermines credibility, making future borrowing more expensive and increasing the likelihood of graylisting.
●What Could Be Done Differently;
- Budget discipline: Ensure loans are earmarked for tangible, sustainable developments—such as infrastructure, energy, agriculture, or digital transformation—that can generate revenue streams.
- Transparency: Strengthen reporting and auditing mechanisms to reassure lenders and watchdogs.
- Public-private partnerships: Channel funds into projects that attract private investment, reducing the burden on the state.
- Revenue diversification: Move beyond reliance on extractive industries by investing in sectors that can provide steady income.
Thank you.
Presley Gean
