James Marape backtracks on plan to use China money to refinance debt

PNG PM James Marape says he’s in talks with “other partners” as well as China to refinance $11.8bn debt.

James Marape with Scott Morrison at Shark Park in July. Picture: Getty Images.

Papua New Guinea Prime Minister James Marape has backtracked on a plan to use Chinese money to refinance his government’s $11.8 billion debt after the shock announcement this week rang alarm bells in Canberra and across the region.

On Wednesday, after a meeting with Chinese Ambassador Xue Bing in Port Moresby, Mr Marape’s office issued a statement saying the Prime Minister would formally ask for Chinese help to refinance his government’s entire public debt.

“(The Prime Minister) requested the Ambassador to inform Beijing on a bid to assist GoPNG refinance its existing country’s K27b debt.

“He stated that a formal letter would be forwarded to the Ambassador to convey to Beijing on this request.

“He suggested that both the Bank of PNG and the PRC People’s Bank will take the lead with the Department of Treasury in ensuring that consultations are underway.”

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However, Mr Marape’s office issued a subsequent statement yesterday saying PNG was also in discussion with other partners “to access very low cost concession finance to give us some breathing space”.

This included the World Bank, the Asian Development Bank and “some other possible non-traditional partners”.

He said PNG’s relationship with the world was not just about China, or the West.

“We have a country to run and our national interest will take precedence with numbers,

rates, and statistics influencing my government’s decisions, including the best terms for loan

refinancing if need be,” he said.

“But at the moment we, as whole of government, have not approved this pathway yet.”

He suggested the first statement — issued via official channels — was sent out in error, saying “someone has run ahead to the media without my consent or knowledge”.

PNG’s public debt stands at about 32.8 per cent of GDP, and costs about 15 per cent of all government expenditure.

Chinese debt currently makes up about 7 per cent of overall debt, while the majority is held domestically in expensive short-term Treasury bills and government bonds.

Security experts said PNG would be in great danger of falling under Beijing’s control if it dramatically increased its Chinese debt.

“Frankly, PNG is of immense strategic importance to us. We saw that in World War II,” Australian Strategic Policy Institute executive director Peter Jennings

“It is the first buffer of any big strategic threat that might develop for Australia.

“And for that country to find itself under the thumb of Chinese financiers I think would be extremely dangerous.”