TREASURER Ian Ling-Stuckey says the recent announcement of $570 million (K1.4 billion) loan from Australia is good news for Papua New Guinea.
He made this remark in response to former Prime Minister, Hon. Peter O’Neill’s critique that the loan will add an additional burden to the existing debt, which has surpassed K60 billion.
“There is no such thing as a free lunch, as the loan is in addition to an already unsustainable level of debt, which now exceeds K60 billion,” O’Neill told NBC news on Wednesday.
“The government needs to reduce its unhealthy spending habits and eliminate politically motivated programs and projects,” the former prime minister said.
However, Treasurer Ling-Stuckey dismisses O’Neill’s critique stating the loan does not add to the country’s debt levels.
“O’Neill is misleading the public by suggesting that this loan will add to PNG’s debt levels; this is inaccurate,” said the Treasurer.
Ling-Stuckey said: “This loan has been fully offset by a reduction in domestic borrowings in 2024. The Australian loan has been taken out as a better way to the fund the 2024 Budget. The initial plan had been to use more Treasury Bond financing, but this was adjusted during the year as the superannuation funds started investing more overseas and the banks started financing more dividend repatriations”.
“We were responsive to these changing market conditions, and sought and obtained this loan instead of our domestic borrowings,” he added.
The Treasurer reiterated that the Australian loan of K1.4 billion is good, cheap and is dedicated towards supporting the budget.
“The Australian loan interest costs of 4.2% is only half the rate of the expensive commercial loans pursued by the former O’Neill government of 8.4% plus high up-front costs in fees,” Treasurer Ling-Stucky stated.
“The disastrous 2018 Sovereign Bond is the main reason that PNG’s debt is rated as “high risk” rather than “medium-risk but sustainable”.
“This is because the full K2 billion of the 2018 Sovereign Bond must be repaid on a single day in August 2028.
“I cannot understand how any responsible Prime Minister could have agreed to such onerous terms,” he said.
Treasurer Ling-Stuckey said the recent Australian loan will be repaid gradually over a period of 20 years.
“One of the conditions of the Australian loan is for PNG to explore options, including with the IMF, on how we deal with the bad, “single bullet repayment” terms of O’Neill’s Sovereign Bond loan.
“O’Neill really has no credibility when he tries to lecture the Marape-Rosso Government on debt management and sustainability.”
Treasurer Ling-Stuckey thanked Australian government for the loan to support the Marape-Rosso Government’s budget.
“On behalf of PNG, thank you to the Australian people. Fortunately, there is no cost to the Australian taxpayer,” he said.
“PNG is benefitting from being able to borrow at Australia’s borrowing costs of 4.2%, rather than much higher international commercial rates.
“PNG has never defaulted on a loan; we are repaying in full the earlier loans taken out from Australia, and our Budget Repair Plan will ensure we will continue to do so.
“Once again, further evidence of the Marape-Rosso Government’s sensible approach to building international partnerships and pursuing good, cheap budget support in line with PNG’s interests,” the Treasure said.
