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Australia willing to assist PNG on debt says Pacific minister


FUNAFUTI, Tuvalu - Australia is willing to help Papua New Guinea refinance its national debt, Minister for the Pacific Alex Hawke said on Tuesday, as Canberra moves to counter what it sees as China’s efforts to increase its influence in PNG.

PNG prime minister James Marape’s office said last week that he had asked China to refinance the K27 billion debt. Marape later said the government was talking with a number of parties about its debt, not just China.

Australia and its western allies worry China has been able to use loans to increase its influence in Asia and the Pacific, described by the United States as amounting to “pay-day loan” diplomacy.

Speaking in Tuvalu’s capital on Tuesday ahead of the opening of the annual Pacific Islands Forum, Hawke said Australian lawmakers would soon head to Port Moresby for talks, including on assistance for debt refinancing.

“Australia is open to assisting, we will assist in anyway,” he said.

China denies using its economic aid as political leverage, insisting it considers the ability of a country to repay loans when offering finance.

PNG is rich in natural gas, crude oil, gold and copper, among other commodities, but revenues have been hit by a downturn in global commodity prices.

PNG’s total public debt was equivalent to around 31% of the value of its gross domestic product as at end June, according to a mid-year budget update released last month. The fiscal deficit at end June was K1.67 billion, equivalent to 1.9% of gross domestic product.

In the update, the government said “cash became tight” earlier in the year, due in part to delays over a proposed $300 million budget loan from the China Development Bank.

The government said in the document the loan is now expected to be made in the December quarter, and “will be tied to an approved list of projects rather than be for budget support”.

Australia has long been the largest donor to PNG, and data for 2017-18 showed its development assistance was nearly 70% of PNG’s total official development assistance, which equates to around 8% of the budget.

Australia has significantly expanded financial aid to the South Pacific, creating a $3 billion fund to offer Pacific Islands cheap loans and grants, and increased its diplomatic presence in the region.


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This surprising wake up call by Australia to refinance PNG's debts is a welcome news. Prime Minister Marape should turn to Australia than China to maintain and enhance PNG's long standing relationship with Australia as neighbour and beneficiary of Australia's annual development grant assistance. However, Australia should make its terms and conditions more favorable and conducive for PNG than any inducement from China.

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