This was announced by IMF managing director Kristalina Georgieva at the weekend, citing the country's "deep macroeconomic imbalances" which she said included:
• The economy has been hit by a series of shocks, including lower commodity prices, a severe drought in 2015-16 and a major earthquake in 2018.
• These shocks have undermined growth and revealed vulnerabilities in public finances and macroeconomic management.
• Government revenues have stagnated, public deficits have widened and SOE losses have materialised, leading to a sharp increase in the ratio of public debt to GDP.
"At the same time, shortages of foreign exchange have inhibited investment and growth in the non-resource sector," the IMF said.
The IMF added that since Prime Minister James Marape came to power in 2019, the government had committed to addressing the imbalances, removing structural distortions currently undermining economic growth, clearing the backlog of foreign exchange orders and restoring the convertibility of the kina.
"The authorities have adopted a comprehensive reform program to address structural rigidities in the economy, while also taking steps to address macroeconomic imbalances.
"Their program includes measures to gradually reverse the recent build-up of public debt and to redirect public spending to more productive uses, including capital investment and the social safety net.
"Structural reforms include the implementation of a medium-term revenue strategy, comprehensive reform of state-owned enterprises (SOEs) and steps to address problems of governance and corruption," the IMF said.
The approval comes following the announcement in parliament of Treasurer lan Ling-Stuckey that the government had applied for a SMP.
Ling-Stuckey said the approval of the application opened the doors for the extra K3.8 billion in international financing vital for building and transforming PNG's economy.
"We cannot deliver the 2020 budget without it. But an IMF program is much more significant than the extra financing. Such a program would demonstrate international confidence in the economic reform program of the Marape government," Ling-Stuckey said.