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Papua New Guinea in 2022

National elections will be held in PNG in the middle of this year. Elections are held every five years and are very popular events. Although voting is voluntary, turnout is just lower than in Australia, where voting is compulsory. An extraordinary number of political candidates are vying for elections. The average number of candidates per seat has increased from eight in 1977 to 30 in 2017, surely a world record.

111 men but no women were elected in the 2017 elections. It is possible (although increasingly unlikely) that special measures will be put in place in the coming months so that this result is not repeated in 2022. Otherwise , the only hope left is that at least some of the growing number of women running for office will succeed in the hustings.

It is impossible to predict election results, as there are no opinion polls and party structures are very fluid. Corn James Marape, Prime Minister since 2019 when he ousted Peter O’Neill in a midterm vote of no confidence, is the favorite, simply because he is the incumbent.

In each of the last three elections, the incumbent Prime Minister has retained his post. Indeed, PNG law was changed at the turn of the century to require the party with the most elected MPs to have the first chance to form a governing coalition. MPs are normally drawn to the Prime Minister’s party. Currently, Marape’s party, PANGU, has 34 MPs, almost three times the size of the next party. There is a high turnover of MPs, but even if there is a contrary move, PANGU will likely come out of the elections as the largest party, giving Marape the top spot in the top job.

Whoever wins the election will face two key questions. One is COVID-19.

Vaccination rates increased in PNG in October and November with the take-off of COVID-19, but with very high levels of vaccine hesitancy, according to the latest estimate, only 2.5% of the population is fully vaccinated. PNG will have to navigate 2022 without significant vaccination coverage. COVID-19 hit PNG hard in the second half of 2021, and it must be very likely that there will be another big wave associated with the introduction of the Omicron variant and possibly the election campaign.

The other problem facing the country is the desperate need to increase economic growth and create more jobs. COVID-19 is in itself an economic problem, and the low level of vaccination in PNG is likely to hamper labor mobility, trade and investment. There could also be other internal interlocks.

While COVID-19 has been bad for growth, it was already slow before the pandemic started. In the absence of data on gross national income and given the landlocked nature of the extractive (resource) sector, non-resource gross domestic product is the best measure of national economic activity. From 2014 to 2019, this grew in real terms by only 0.9% per year on average. The budget predicts this will accelerate to an annual average of 4.4% from 2021 to 2027. It’s unclear how.

Perhaps one of the various resource projects currently being negotiated will be finalized during this time and its construction will give the economy a much-needed boost. But with all the uncertainty surrounding the projects currently under discussion, the government is wisely not counting on it.

Growth in government spending this year, including much-needed increases in health spending, will help economic growth, but PNG is running record deficits to support spending in the face of COVID-19. The rapid growth in spending cannot be sustained. Although the latest budget allows for a 3.5% increase in spending after inflation in 2022, it does not allow for any further spending growth through 2027.

The main drag on growth since 2014 has been the shortage of foreign exchange, which remains a problem to this day. In the annual surveys, business leaders in PNG ranked foreign exchange as one of their top four concerns every year between 2014 and 2021, and often as their top concern.

PNG’s central bank has been content to ration currency to protect the exchange rate and its foreign exchange reserves. The government has recently amended the Central Banks Act requiring the Bank of Papua New Guinea to consider growth as well as the inflationary consequences of its policies. Given the disastrous impact of currency rationing on growth in recent years, it is hoped that this will encourage the Bank of Papua New Guinea to change course and eliminate currency rationing.

Ultimately, whoever wins the 2022 election will find themselves in the odious position of having to exercise fiscal discipline while trying to accelerate economic growth. It won’t be easy.

This is an edited version of an article that first appeared on East Asia Forum.

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Last year, the author served on the PNG Independent Advisory Group (IAG) which made recommendations regarding the Central Banking Act mentioned above. For more details, see the AGI website.