Australia’s Contribution to Papua New Guinea Reaches $3 Billion with Additional $570 Million Donation
Treasury states that the sum provided to Papua New Guinea (PNG) by the federal government, totaling $3 billion since 2020, is considered a loan and “involves no cost to the Australian taxpayer.”
The loan was revealed in a National Interest Statement, coinciding with Parliament’s return ahead of upcoming elections. It was granted in response to a request for financial assistance from PNG Treasurer Ian Ling-Stuckey on Aug. 25, 2024. Ling-Stuckey expressed gratitude for the support and noted the progress made by the PNG government towards budget improvement.
Since signing the Comprehensive Strategic and Economic Partnership in 2020, PNG has requested financial aid from Australia annually. The latest $570 million tranche aims to help PNG meet its 2024 budget financing requirements, emphasizing the importance of regional prosperity and stability.
PNG Also Owes the IMF, New Zealand
Alongside support from Australia, PNG receives assistance from the International Monetary Fund (IMF) to address vulnerabilities, foster inclusive growth, strengthen debt sustainability, alleviate foreign exchange shortages, and enhance governance.
Australia stands as the biggest lender to PNG with a total exposure of $3 billion. The IMF has provided US$928 million, and New Zealand has contributed US$850,000. PNG’s 2023 Budget deficit was $1.83 billion (4.8 billion in local currency), accounting for 4.3 percent of GDP.
Despite challenges, PNG remains committed to budget repair and improving its fiscal position, as shown in the 2024 Mid-Year Economic and Fiscal Outlook (MYEFO).
Australia’s loan, with an interest rate of 4.216 percent over 20 years, ensures no profit for Australia, with interest charged at the country’s cost of borrowing. The decision to aid PNG aligns with Australia’s interest in promoting economic and political stability in the region due to shared connections and the strategic importance of PNG’s security and stability.
Although PNG faces challenges, with an expected economic growth rate of 4.6 percent for the current financial year, it remains a primary interest for Australia. The loan terms include repayment in six-monthly instalments.
