This theoretical paper examines the impact of Foreign Direct Investment (FDI) and economic prosperity in Papua New Guinea. The study analyses the influence and correlation of FDI inflows on the growth of the national economy, using GDP growth as a proxy for economic well-being, applying regression and correlation analysis based on time-series from 2002 to 2022. Findings indicate a statistically insignificant correlation between the growth rate of FDI and GDP, suggesting that external investments alone do not directly influence economic growth. The study attributes this weak linkage to the concentration of FDI in mining and extractive sectors, which typically have limited employment and value chain effects. The contribution of the paper lies in offering sector-specific policy recommendations to diversify FDI into manufacturing, agriculture, and the service industry to contribute to economic growth. It recommends infrastructure development, policy stability, and human development to increase the economic return of foreign investments. This theoretical paper contributes to the literature by confirming that FDI's effectiveness in promoting economic growth is context-dependent and requires strong absorptive capacities in the host economy.