Support vow as PNG crisis deepens

Australia will consider hundreds of millions of dollars of fresh budget support for Papua New Guinea.

International Development Minister Zed Seselja says Australia will not abandon its closest neighbour. Picture: AAP

Australia will consider hundreds of millions of dollars of fresh budget support for Papua New Guinea as the country battles an economic emergency on top of unchecked Covid-19 infection rates.

International Development Minister Zed Seselja said Australia would not abandon its closest neighbour to deal with the twin crises alone, but warned its handling of the Covid-19 pandemic would be central to its prospects for economic recovery.

Australia has provided two low-interest loans to PNG in recent times, consolidating them last year into a single $558m debt.

Senator Seselja, who visited PNG earlier this month, flagged talks on additional support as the country struggles to fund a forecast deficit of at least 7 per cent of GDP.

“We certainly don’t want to leave the people of PNG in the lurch. Obviously we will consider carefully any request that comes through,” he said. “Certainly we have given low-interest loans in the past for budget support including very recently during Covid.

“Obviously there will be further discussions about what type of future support there is … also working with multilateral partners.”

PNG has vaccinated just 0.6 per cent of its people, and last week recorded its first case of Delta-strain Covid-19. It is due to dispose of an estimated 70,000 donated AstraZeneca jabs which expire before the end of the month, amid rampant vaccine hesitancy.

Testing rates have also been wound back after the number of Covid-19 cases reported hit 17,340, leaving officials unsure of the true extent of the pandemic’s spread.

Senator Seselja said PNG stood a better chance of normalising economic ties with the rest of the world if it could boost vaccinations. “The more vaccinations occur in PNG the better it’s going to be and the easier it’s going to be,” he said.

With local funding options largely tapped out, PNG faces borrowing costs of more than 10 per cent on new debt, compared to Australia’s 1.28 per cent.

PNG’s High Commissioner to Australia John Kali said the country was in an economic hole and needed help to get out of it.

“Our revenue collections are not that good, and the other side of the balance sheet is really building up,” he said. “We’ve got to really balance it out and the way to do it is to get support from partners like Australia.”

Mr Kali said PNG was working with the World Bank and the IMF to improve its fiscal responsibility, “but it’s going to take a while to do those reforms”.

China, which has accused Australia of meddling in its Pacific vaccine diplomacy, has for years sought to increase its support for PNG through Belt and Road Initiative projects. But Australia, the US and Japan are trying to prevent PNG from falling further into debt to Beijing, offering funding for quality infrastructure projects.

During his visit, Senator Seselja committed $10m towards a new national highway project, while Australia earlier committed to help redevelop the country’s major ports. Senator Seselja said the approval of new resources projects, including a joint venture between Australia’s Newcrest Mining and South Africa’s Harmony Gold to develop the Wafi-Golpu mine, would also be key to PNG’s recovery.