Australia helps expedite PNG budget repair
07 February 2025
IAN LING-STUCKEY
| PNG Minister for Treasury
PORT MORESBY - The recent announcement of a K1.4 billion budget support loan from Australia is good news for Papua New Guinea.
The Australian loan interest of 4.2% is only half the rate of the expensive commercial loans pursued by the former O'Neill government of 8.4% plus high up-front costs in fees.
The disastrous 2018 Sovereign Bond is the main reason that PNG’s debt is rated as ‘high risk’ rather than ‘medium-risk but sustainable’.
This is because the full K2 billion of the 2018 Sovereign Bond must be repaid on a single day in August 2028.
I cannot understand how any responsible prime minister could have agreed to such onerous terms. Instead, the recent Australian loan will be repaid gradually over a period of 20 years.
One of the conditions of the Australian loan is for PNG to explore options, including with the International Monetary Fund, on how we deal with the bad ‘single bullet repayment’ terms of O'Neill’s Sovereign Bond loan.
O'Neill really has no credibility when he tries to lecture the Marape-Rosso Government on debt management and sustainability.
O'Neill is also misleading the public by suggesting that this loan will add to PNG’s debt levels. This is inaccurate.
This loan has been fully offset by a reduction in domestic borrowings in 2024. The Australian loan has been taken out as a better way to the fund the 2024 Budget.
The initial plan had been to use more Treasury Bond financing, but this was adjusted during the year as the superannuation funds started investing more overseas and the banks started financing more dividend repatriations.
We were responsive to these changing market conditions, and sought, and obtained, this loan instead of our domestic borrowings.
PNG’s debt level on 31 December 2024 is actually estimated to be slightly lower than the 2024 MYEFO [mid-year economic and fiscal outlook] forecast. O'Neill simply doesn't know what he's talking about.
Improved economic management under the Marape-Rosso government is providing a much brighter future for PNG.
Our people suffered too much from 2012 to 2018 when living standards went backwards.
The record levels of sustained non-resource growth since 2020 is gradually turning this around, but our people are still much worse off than they were in 2012.
Part of our improved economic management is our Household Assistance Packages, designed to help ease these cost of living pressures.
Another key part is the 13 year Budget Repair Plan. The plan is based on returning to a budget surplus by 2027, and then giving the next parliament the option to start repaying all of PNG’s debt.
The plan is based on large cuts in the budget deficit of one billion kina a year. The level of these cuts is based on balancing the need for budget repair but not irresponsibly undermining our economy and the delivery of services.
PNG’s economic reform credibility is recognised by our international partners, including the international credit ratings agencies.
The budget deficit continues to be rapidly reduced, dropping from 8.9% of GDP in 2020, down to an estimated 2.2% in 2025, less than one-quarter.
We are on target for an estimated budget surplus by 2027, and when we hit the budget surplus, this means we start paying down our overall debt level.
On debt sustainability, our debt to GDP ratio has fallen from 52.6% of GDP in 2021, down to an estimated 47.1% in 2025.
As part of the 2025 Budget, we once again reduced the maximum level of the debt to GDP ratio in the Fiscal Responsibility Act down from 60% in 2023 to 55% in 2025.
We will continue lowering this peak level as the debt to GDP ratio is expected to fall below 30% by 2030.
The Australian loan support is greatly appreciated. On behalf of PNG, thank you to the Australian people.
Fortunately, there is no cost to the Australian taxpayer. PNG is benefitting from being able to borrow at Australia’s borrowing costs of 4.2%, rather than much higher international commercial rates.
PNG has never defaulted on a loan. We are repaying in full the earlier loans taken out from Australia, and our Budget Repair Plan will ensure we will continue to do so.
Once again, further evidence of the Marape-Rosso government’s sensible approach to building international partnerships and pursuing good, cheap budget support in line with PNG’s interests.
Ian Ling-Stuckey’s statement provided with thanks to Martyn Namorong
Loans are good. No country can operate itself without others. We need each other. PNG needs Australia and Australia also needs PNG.
We are neighbours and have historical ties that extend through many generations. The ministers should not be throwing stones at each other, instead they should talk about how transparently and accountably we can use this loan to benefit PNG, and on what projects.
Every government has its own weaknesses and failures. We should not look at failures and talk about what went wrong. We should focus and concentrate on what we can do for PNG now and going forward.
Negativity is a sickness that holds back progress.
Posted by: Peter S Kinjap | 09 February 2025 at 12:09 PM
When on patrol over 50 years ago I took a Coleman lamp to the meeting place in whatever village I was in and started discussions on what important things people in the village wanted to talk about. Often it was coffee prices and why the price people got for their green coffee beans at the nearest trade store varied all the time.
Trying to explain about how the effects of climate and global markets had on the price of coffee being produced in Brazil was hard enough, but possible. The example I used was to talk about the effects of supply and demand had on local produce at the food local market, if there was one.
However, try and explain the messages in this dissertation to those who have no idea about 'national debt and future borrowings' and how it affects those in the nation.
Most of those in government don't appear to either know or care, as they rack up future debt for future generations to pay?
(By the way, I'm referring to nations like Australia.)
Posted by: Paul Oates | 07 February 2025 at 08:34 AM