Buried beneath the big-ticket items in the Australian Government’s latest budget statement, a relatively small outlay to Papua New Guinea (PNG) barely rates a mention. But, while the commentariat hones in on Stage Three Tax Cuts, domestic violence measures and housing funding, Canberra’s efforts to woo its northern neighbour are worth closer scrutiny. In fact, we might ask, what is actually going on here?
Under the header “International Assistance”, the 2024-25 Budget Papers reveal that AU$600m has been loaned out “to address the PNG Government’s estimated 2023 budget shortfall”.
The paper goes on to note that the funds had been requested by Prime Minister James Marape on his visit to Canberra earlier this year.
But, while the Treasury’s boilerplate tones suggest an inconsequential transaction, some investigation raises concerns.
This latest loan is actually the latest in a series of annual budgetary injections. In total, AU$2.6 billion has been rolled out in retrospective, unprogrammed budget support to the Government of Papua New Guinea by the Australian Government since 2021.
Government statements suggest the outlay presents “no cost to the Australian taxpayer”, because the loans are made through the International Monetary Fund’s multilateral development programs, and, presumably, because the Treasury believes the loans will be fully repaid.
But, the terms of the loans are not entirely clear, and a proposed repayment schedule is not included.
Further, being budget, or consolidated revenue, and paid to PNG after the money has already been spent, it is impossible to know where that money is going and who exactly is benefiting.
It is right that both the citizens of PNG and Australia would be concerned when PNG Government debt levels have almost doubled in the last five years, rising from AU$12.85 billion in 2019 to just over AU$25 billion projected for 2024.
Government debt now accounts for over 52% of PNG’s GDP, up over 20% in just five years.
In fact the IMF in its latest assessment has listed PNG as a country at high risk of debt distress.
In this context, this spinning turnstile of loans looks irresponsible, enabling a debt-junkie government to hit up on more loans.
It makes the justification used by Canberra that it is “in Australia’s interests to have an economically stable partner (PNG) with sustainable fiscal management” look fanciful.
It could be argued this series of loans is going in exactly the opposite direction.
Papua New Guinea is currently ranked 133rd out of 180 countries on Transparency International’s global corruption index. The anti-corruption body says more than half of the public service is “on the take” and that 57% of New Guineans have been offered money for their vote in the last 5 years.
In this landscape, how sure can the Australian Government be that any of the funds they are providing are going where they are meant?
The political context adds further concern.
The geo-strategic climate has thrown a pall over the entire Indo-Pacific region, and ramped up big power focus on pivotal countries like PNG.
PNG’s popularity was demonstrated recently as the Chinese Foreign Minister, Wang Yi made a high profile visit to PNG and was followed within hours by visits by Australian Prime Minister, Anthony Albanese and a large delegation led by New Zealand’s Foreign Minister, Winston Peters.
This situation has provided openings for political opportunists to make gains as money and influence sloshes about like the Pacific tides.
The subsequent war of narratives, money and influence is impacting all countries in the region, skewing their agendas and tilting many towards short-term gain in the face of long-term pain.
It’s a political circus and if Australia thinks it can compete with Beijing in terms of throwing money around, it is deluded.
China will always win a cash race and they will require less governance benchmarks than even Australia’s seemingly low setting.
Playing pay-day-lender is doing neither Australia nor PNG any favours. Canberra is throwing money at Budget shortfalls well after the Budget has been spent and in doing so, is enabling PNG’s love of debt, pork barrelling and corruption.
A better approach is to tie aid to specific projects and to Australia-approved and homegrown providers.
This will ensure projects that do keep to Australia’s totally appropriate aim of economic stability and fiscal rectitude in PNG.
Perhaps just as importantly, this will engender more business-to-business and people-to-people interactions between Australians and Papua New Guineans, enhancing shared history and genuine friendship, a strategic space in which China struggles to compete.
Pouring funds into PNG’s deep debt pockets is not only bad policy, it is doing a disservice to PNG’s long suffering population, who, as we have seen earlier this year, are not happy and are prepared to show it.
If Australia is to have any influence in PNG, it is the broad population, rather than political elites, to whom it should pitch with genuine, targetted initiatives of support and friendship.
Carolyn Blacklock is founder and principal at Ipsum Pacific, a strategic consultancy advising Pacific governments and state-owned companies. She previously served as Managing Director of electric utility, PNG Power, and as a special adviser to the Prime Minister of Papua New Guinea.
The opinions expressed in this article are those of the author and do not necessarily reflect the opinions of this publication.