The economy has recovered to pre-COVID level but remains below its pre-COVID trajectory. The COVID-19 crisis led to an economic contraction in 2020-21 before recovering by 5.2 percent in 2022. The recovery in the extractive sector was driven by significant improvement in international prices of key export commodities, although the shutdown of the Porgera gold mine limited the rebound. Growth is estimated to have slowed down to 2.7 percent in 2023, primarily attributed to reduced global demand and domestic supply constraints stemming from scheduled maintenance in extractive facilities. The government has continued implementing its plan of fiscal consolidation to safeguard macroeconomic stability. The pandemic exacerbated underlying fiscal weaknesses in PNG. As the economy recovered to prepandemic level, the government reduced the fiscal deficit from 8.8 percent of GDP in 2020 to an estimated 4.4 percent of GDP in 2023. Most of the improvement came from resource revenue. The public debt has stabilized. However, according to the latest World Bank–IMF DSA, the country remains at high risk of debt distress. Conditional on the implementation of the authorities’ plans for further fiscal consolidation and conservative financing strategies, external and overall public debt is sustainable. Inflation bottomed, while Bank of PNG moved to greater exchange rate flexibility. Headline inflation fell from 6.3 percent in 2022Q3 to 1.4 percent in 2023Q2, year-on-year, before increasing to 3.9 percent in 2023Q4. Since September 2023, the Bank of PNG reduced the policy rate three times, by cumulative 150 basis points, to 2 percent. Supported by an IMF-funded program, BPNG took steps towards greater exchange rate flexibility and allowed, since May 2023, gradual and moderate depreciation of kina to USD to help resolve the forex rationing issue. From January 2024, BPNG implemented a crawl-like exchange rate arrangement.