The report suggests that revenue is determined by the “well-head value”, which is the difference between LNG-sales and the sum of operating costs, amortisation costs, and capital allowances.

According to the Bank, the wellhead value can be negative during times of low LNG prices, even when the project generates operating profits. In addition, there are various complex tax exemptions and allowances. Taken together, these factors explain why the project has so far only paid K150 million in royalties, and nothing in corporate tax.

Consequently, the report cautions against the provision of such overly favourable terms to future resource extraction projects.

The report suffers from a number of shortcomings. For example, it only includes a short section on the economic performance of the non-resource sector, which is the most relevant for the vast majority of Papua New Guineans, and seems to ignore the mounting evidence that this part of the economy has, in fact, been in recession.

There is also no mention of the historic collapse in imports, which declined from 95% of non-resource GDP in 2006 to just over 20% of non-resource GDP in 2016. This collapse is indicative of a recession and reflective of the severe adverse effects of the foreign exchange restrictions imposed by BPNG in 2014.

In relation to the foreign exchange controls, the World Bank highlights their costs and recognises that the real exchange rate is overvalued. The bank acknowledges that the longer the foreign exchange restrictions, or status quo, is in place, the higher the costs will be and the more likely a “disorderly exit towards a more flexible exchange rate regime” will become.

In conclusion, the report contains novel and important information on the PNG economy and a useful roadmap for how to improve fiscal, monetary and exchange rate policies in the medium to long run. However, its exchange rate policy recommendation is not suited for effectively and promptly ending PNG’s foreign exchange crisis, the country’s most urgent problem.