Papua New Guinea's gross government debt has been cut from over 60% of GDP in 2003 to below 40% in 2006, according to the World Bank.
The National newspaper reports the Bank's recent East Asia Update has attributed fiscal policy in recent years for the drop.
It said Government spending as a proportion of gross domestic product (GDP) had declined, while the proportion of revenue has grown.
This year's fiscal surplus is expected to fall from last year's level of 6.4% of GDP due to lower mineral tax revenues and higher spending in the lead up to the general elections.
While the macroeconomic outlook remains favourable, uncertainty has reportedly increased as a result of the looming general elections and the relatively frequent recent cabinet changes.
However it said high prices for oil, copper and gold had helped the country's economic performance, with prudent fiscal management playing an important role.
