Stephen Howes - Will yesterday's joint ministerial forum reveal detail of required economic reform in PNG?
STEPHEN HOWES | DevPolicy Blog
CANBERRA - Media reporting of Papua New Guinea’s efforts to access foreign loans to finance the government’s budget has been far from accurate or complete.
But the efforts themselves are real. And they pose significant challenges for both the country’s suitors, China and Australia, and most importantly for PNG itself.
As reported in official PNG documents, PNG has been trying to obtain a loan from China since last year. The government is seeking K1 billion from China’s National Development Bank.
In principle agreement was reached at APEC last year, but the deal is still not yet done. The sticking points are the interest rate, and that China normally lends for projects, whereas PNG wants the money not be earmarked.
It needs the loan to pay salary bills and interest. Given the length of time the negotiations have taken, it is not clear when or indeed if China will come to PNG’s aid.
It’s not that China never provides non-earmarked budget support, but it is certainly the exception rather than the rule. Given the difficulties PNG is experiencing in obtaining K1 billion from China, talk of China refinancing PNG’s K27 billion of government debt is fanciful.