PNG seeks $1.5 billion loan from Australia

By Angus Grigg - Financial Review

Papua New Guinea is seeking $1.5 billion in loans from Australia to help fund government spending programs, just weeks after floating the idea of China refinancing its entire national debt. Commerce Minister Wera Mori said the proposal was raised with Treasurer Josh Frydenberg at a meeting on Monday.

“I would like to see it [the loan] done by Australia alone, but if not Australia could take the lead,” he told The Australian Financial Review on the sidelines of a conference in Sydney.

“Australia has always been our friend, where else can we go.” Mr Frydenberg declined to comment but confirmed he had met with PNG's Treasurer Sam Basil.

In recent years Australia has balked at providing budget support to PNG since ending the practice in June 2000 and concentrating on direct funding of aid programs.

Since then Canberra has typically worked through multilateral organisations such as the World Bank or the International Monetary Fund when helping to finance budget support programs.

Such a reluctance to intervene directly may have eased in recent years as China looms larger as a strategic competitor in the Pacific and the Morrison government seeks to re-focus on the region as part of its “Pacific step-up”.

PNG last requested financing support from Australia in 2017, when the former government of Peter O’Neill sought to have Australia’s entire $558 million annual aid program delivered in the form of budget support.

Canberra rejected the idea, with former minister for international development Concetta Fierravanti-Wells warning that “aid was not charity”.

Corruption has been one of the major concerns in providing direct budget assistance, but Mr Mori said the new government of James Marape was “stepping up the fight” in this area.

“We have demonstrated this by holding a commission of inquiry into the UBS loan and we are strengthening ICAC [Independent Commission Against Corruption]," he said.

Earlier, Mr Mori told the PNG Investment Conference that new loans were needed to shore up the budget and stabilise the economy.

“The new Marape/Steven government is looking for some type of assistance from the Australian government to stabilise the PNG economy and for budget support,” he said.

On the sidelines of the conference, Mr Mori indicated fresh funds would not be sought from China for budget support.

“I think we have too much exposure to China ... that’s just my personal view,” he said.

Earlier in the month a press release from Mr Marape’s office indicated PNG was seeking $11.8 billion from China to restructure its national debt.

But just a day later the Prime Minister sought to hose down any loan package from China, saying the statement was put out without his knowledge.

Mr Marape said PNG was seeking assistance from China along with others such as the World Bank and "non-traditional partners".

The PNG economy has faltered this year amid foreign exchange shortages and a lack of new resource projects, leading to government revenue falling well behind budget targets.

Stephen Howes, a PNG specialist at the Australian National University, said PNG's economic recovery in 2018 had stalled this year and the country continued to suffer from boom and bust cycles.

“To be sure, future-year prospects are better, with some important infrastructure projects underway and the Papua LNG agreement signed, though now under review,"  he wrote in a blog post on August 8.

Go to this link for more: https://www.afr.com/policy/foreign-affairs/png-seeks-1-5-billion-loan-from-australia-20190819-p52in6