The International Monetary Fund says Papua New Guinea's economy is expected to expand three per cent this year.
The IMF report says this is about the same economic growth rate for the fiscal 2004 year.
In a statement the IMF said the fiscal position has improved due to restrained expenditure, high commodity prices and low interest rates.
The prevailing low interest rates resulted from the country's stronger fiscal position as well as the exchange rate appreciation.
According to the IMF, this has led to a sharp drop in inflation.
The National reports the IMF saying that the challenge is to sustain these recent gains and move the economy to a higher growth path to reduce poverty.