Page 5 - IB May 2024

Opinion

A TURNSTILE OF BAD DEBT

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

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