The federal government has given another $570 million (US$356.41 million) to Papua New Guinea (PNG), bringing the total amount provided by Australia since 2020 to $3 billion.
Treasury says it “involves no cost to the Australian taxpayer,” but the loan has only been revealed in a National Interest Statement, presented as Parliament returns for what will be a busy period ahead of the election.
The statement says the loan was made in response to a letter from PNG Treasurer Ian Ling-Stuckey sent on Aug. 25, 2024, “requesting financial assistance.” It goes on to say he thanked Australia for “vital budget support and noted the important progress the PNG government has taken to repair PNG’s budget.”
PNG has asked Australia for money every year since 2020 when it signed the Comprehensive Strategic and Economic Partnership.
The latest tranche is needed to “enable the PNG Government to meet its 2024 budget financing needs,” Treasury says. The loan “reflects the importance both governments attach to regional prosperity and stability.”
Four months after receiving Ling-Stuckey’s latest plea, Australia agreed to the loan.
PNG Also Owes the IMF, New Zealand
PNG also receives assistance from the International Monetary Fund (IMF), which Treasury says is aimed at “helping protect the vulnerable and foster inclusive growth, with a focus maintained on strengthening debt sustainability, alleviating foreign exchange shortages, and enhancing governance and operationalising the anticorruption framework.”
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Australia’s exposure of $3 billion makes it by far the largest lender to PNG.
The IMF has provided US$928 million under its Extended Credit Facility and Extended Fund Facility Program, and New Zealand has also contributed US$850,000.
PNG’s 2023 Budget deficit was $1.83 billion ($4.8 billion in local currency), representing 4.3 percent of GDP.
Its 2024 Mid-Year Economic and Fiscal Outlook (MYEFO) put the figure at $1.52 billion or 3.2 percent of GDP, which Treasury says shows “the PNG Government remains committed to budget repair and improving the country’s fiscal position.”
While PNG will be charged interest, Australia will make no profit—the loan will be charged at Australia’s cost of borrowing.
Treasury’s analysis says it is in Australia’s interests to promote economic and political stability in PNG, “given its geographic proximity and the unique and enduring connections that span decades.
“PNG’s security and stability is a fundamental Australian strategic interest.”
It expects the country’s economy will grow at 4.6 percent in the current financial year, though it accepts “many challenges remain” from inflationary pressures, a slowing global economy, and a weak fiscal position.
The loan is for 20 years, has a current interest rate of 4.216 percent, and is to be repaid in six-monthly instalments.
