Papua New Guinea is negotiating cheaper international financing options in Washington DC this week to refinance its K2.25 billion Eurobond debt, reduce costly interest payments and strengthen the country’s financial position ahead of the August 2028 repayment deadline, according to Treasurer Ian Ling-Stuckey.
One of the challenges facing the Marape-Rosso Government is the decision made in 2018 to borrow K2,250 million (US$500 million) at a high interest rate of 8.35 per cent, excluding additional fees and charges, with the entire principal due in a single “bullet” payment in August 2028, Minister Ling-Stuckey said.
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The loan costs the Government nearly K200 million annually in interest payments from the national budget and is a major contributor to Papua New Guinea’s high-risk debt distress rating, Minister Ling-Stuckey added.
The Government is therefore focusing on how to repay the massive loan while exploring cheaper refinancing options nearly two years ahead of the repayment deadline, Minister Ling-Stuckey said.
“As part of these efforts, meetings were held in Washington DC this week to explore affordable financing arrangements.”
“The timing is critical because the 2027 National General Election will consume nearly a year of what are normally lengthy negotiations for concessional financing guarantees to commercial markets,” Minister Ling-Stuckey said.
Access to these financing options has become easier following PNG’s historic performance under the International Monetary Fund (IMF) programme, Minister Ling-Stuckey said.
The first meetings were held with the World Bank, which could significantly reduce interest costs on any new commercial borrowing from international markets, Minister Ling-Stuckey further said.
The World Bank can provide guarantees to international lenders covering up to 95 per cent of potential losses on a loan, substantially reducing the perceived risks of lending to PNG, Minister Ling-Stuckey continued.
Other possible areas of assistance include financing resource-related activities and helping the Government take equity stakes in projects, Minister Ling-Stuckey said.
The meeting also discussed options for indirectly supporting the Papua LNG project and State participation, Minister Ling-Stuckey said.
The World Bank agreed to a request from PNG Treasury for a follow-up technical meeting in Port Moresby during the week beginning November 9, Minister Ling-Stuckey said.
The rapid response was greatly appreciated by Prime Minister James Marape, Minister Ling-Stuckey said.
The Washington meetings also included discussions with the IMF, with PNG’s seventh programme review scheduled to go before the IMF Board in early December, Minister Ling-Stuckey said.
The discussions focused on resolving outstanding issues necessary to secure approval of the seventh review, including additional financing considered essential for implementing the 2026 national budget, Minister Ling-Stuckey said.
They also examined options for future IMF programmes, including two specific arrangements, Minister Ling-Stuckey said.
The first option is continuing the existing Extended Credit Facility (ECF) and Extended Fund Facility (EFF) programme, similar to the current arrangement between PNG and the IMF, Minister Ling-Stuckey said.
The second option involves a standby or contingent loan arrangement designed to provide financial support against unforeseen future economic shocks, including potential challenges associated with Eurobond financing, Minister Ling-Stuckey said.
These proactive discussions are important for securing PNG’s financial future, Minister Ling-Stuckey said.
The Government’s relationships with international development partners continue to provide financing options to address past borrowing decisions and strengthen the country’s economic position, Minister Ling-Stuckey said.