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MELBOURNE, June 10 (Reuters) - The International Monetary Fund has approved emergency credit of about $364 million to Papua New Guinea so it can cover the costs of dealing with the coronavirus pandemic while it struggles with a budget deficit.
The IMF said PNG’s resource-dependent economy had been hit by measures to prevent a major outbreak of the virus and was facing a balance of payments shortfall of around 4% of gross domestic product (GDP) and a budget deficit of more than 6% of GDP.
PNG will have access to 263.2 million of the IMF’s special drawing rights, equivalent to about $363.6 million, it said.
“Papua New Guinea is facing headwinds at a time when its economy is already fragile and has limited fiscal space,” IMF Acting Chairman Tao Zhang said in a statement on Tuesday.
“The fall in global prices for some of its major exports is posing additional challenges,” he said.
The country’s biggest export is liquefied natural gas (LNG) and those volumes have stayed steady. However LNG prices, tied to oil prices, have fallen in line with a drop in crude after fuel demand plunged because of the pandemic lockdowns.
Declining tax revenues and dividends from state-owned corporations have reduced government funding at the same time it shifted spending toward healthcare and unemployment payments to cope with the coronavirus outbreak.
Credit rating agency S&P lowered its long-term foreign and local currency sovereign credit ratings on PNG to ‘B-‘ from ‘B’ in April after the country’s supplementary budget revealed a worse than expected fiscal deficit.
The country’s growth outlook has been hurt by protracted negotiations on new energy exporting and mining projects which have delayed new investments as the government seeks to extract more benefits for the country than in previous projects.
Reporting by Sonali Paul; Editing by Christian Schmollinger