Details of $442m PNG loan kept secret

The Morrison government has refused to provide details of the terms of a $442m loan to PNG amid calls for more transparency.

Papua New Guinean Prime Minister James Marape. Picture: AAP

The Morrison government has refused to provide details of the terms of a $442m loan to PNG amid calls from the aid sector for more transparency over the deal.

The PNG government has disclosed the funds will be lent at the heavily discounted rate of 2.5 per cent per annum, but neither PNG nor Australia will say when the loan must be repaid or whether it is conditional on the delivery of budget reforms.

The loan comes after months of intense pressure from PNG Prime Minister James Marape, who threatened to go to China to refinance the country’s entire $11.8bn public debt.

The Australian Council for International Development said there were unanswered questions about the budget-support loan, which is being delivered through the Australian government’s export finance arm and overturns decades of practice in the delivery of aid to PNG.

ACFID policy director Bridi Rice said the loan could deliver PNG much-needed short-term liquidity and provide a catalyst for reform, but this was “far from certain”.

“This is a departure from business as usual for the Australian government and it remains unclear how it will manage the heightened risk which comes with it,” she said.

“Despite assurances it won’t hit the budget bottom-line, the commonwealth still bears all risks and losses on national interest account loans.”

Lowy Institute Pacific Program manager Jonathan Pryke said with the right safeguards, the loan could be used to encourage the Marape government to enact much-needed structural reforms: “However, the taxpayer has a right to know exactly what the terms of this loan are — how long, rate of interest, the conditions around it to prevent graft.”

The loan comes just months after the Department of Foreign Affairs and Trade reported “corruption and weak management” continued to hamper service delivery in PNG through Australia’s $578m in annual aid to the country.

Minister for the Pacific Alex Hawke said the loan was being provided by Export Finance Australia on the National Interest Account and would be structured to incur no cost to the taxpayer. He said it would help PNG put its budget on a sustainable trajectory and support long-term economic reforms.

“This assistance reflects the Australian national interest in a stable and prosperous PNG,” Mr Hawke said.

Export Finance Australia said its loan terms were negotiated on a case-by-case basis and were commercially sensitive. “EFA has a general obligation under section 87 of the EFIC Act to keep information concerning the affairs of its clients confidential. This is consistent with the well-established banker’s common law duty of confidentiality to clients,” a spokesman said.

Australia has refused for more than 20 years to provide budget support loans to PNG, preferring to directly fund ser­vices and programs.