💦 FULL SET: Id/mauschena - Uncensored 2025

Papua New Guinea suffered a financial crisis in 1994, due to a large budget deficit and a lack of foreign exchange reserves. In mid-1994, the deficit reached 11% of GDP, and the Bank of Papua New Guinea announced it would no longer provide loans to the government. Emergency measures to curb government spending were implemented in 1994, and from 1995 the country obtained international support to implement economic reforms.

The country's national debt and deficit rose throughout the early 1990s, during a time when Australian budgetary support was declining and the formerly very profitable Panguna mine was closed. The increased government expenditures did not translate into improved public services, with health and education declining. These years saw historically high levels of capital flight. At the end of 1993, foreign reserves were reduced to just two weeks of expenditures. While deficits continued to increase, in early 1994 tax revenue decreased, and both the central bank and international financial institutions warned of a pending economic crisis.

The government took a number of measures to cut spending, including changing how government expenditures were approved and delaying non-salary payments. These actions impacted both the public and private sectors, reducing public services and depressing private economic activity. An unrelated change of government at the end of August was followed by the new government implementing further measures, including selling off its stakes in some companies, and devaluing the Papua New Guinean kina. The kina was eventually fully floated.

In 1995 the government entered a multi-year economic reform programme funded by foreign loans. This sought to provide economic stability and increase investment. Government expenditures were restructured, non-tariff barriers to trade were reduced, and public services were devolved to provinces and districts. Overall, the budget deficit decreased and even achieved a small surplus, and the economy began to grow again. Nonetheless, growth remained slow until the early 2000s.