Monday June 8, 2020
The Marape-Steven Government has secured a K1.2 billion soft loan following an International Monetary Fund (IMF) board vote on Friday 5 June 2020.
Prime Minister, James Marape, says this landmark achievement is a strong vote of confidence in the Marape Government from the international community.
“This vote is a major sign of confidence in the PNG economy from the IMF.”
The K1.2 billion lending program was secured on unprecedented terms of 0.0% interest rate over 10 years with a 5.5 year grace period and the first principal repayments to start in December 2025.
Like the Australian bridge financing in 2019, the loan will go straight into the Bank of Papua New Guinea with direct foreign exchange benefits for the private sector.
“I want to assure the people of this country that this loan will be put to good use in supporting our proven policy based programs.
“These include support for our COVID-19 response, Connect PNG, Special Economic Zones to promote exports, the Higher Education Loan Program (HELP), Agriculture and MSME policy, State-Owned Enterprises reforms, and Public Sector reforms,” said Prime Minister Marape.
This loan forms the core of the 2020 budget and is within the government’s five-year fiscal consolidation strategy that aims to bring debt-to-GDP ratio to below 40 per cent in 2024 in order to restore commitment to the limits set out in the Fiscal Responsibility Act.
Prime Minister Marape commended the Minister for Treasury, Ian Ling-Stuckey for securing this landmark financing agreement.
“I want to congratulate Treasurer Ian Ling-Stuckey for working tirelessly to repair the country’s budget.
“He has put a stop to reckless borrowings for poorly conceived capital projects that mostly benefited foreign firms and state owned enterprises (SOEs). He has stopped expensive commercial borrowings where the financial benefits flowed to foreign bankers. He has instead delivered a major reform agenda that has reshaped our debt management strategy to focus on securing good, cheap, transparent financing from the international community and our priority strategic partners such as Australia.”
Treasurer Ling-Stuckey and his dedicated team had worked closely with the IMF over many months to achieve this extraordinary outcome.
“I thank the IMF Board for recognizing my Government’s sincerity and transparency in setting a new direction for the economy.
“ We are a more open, transparent and accountable government working to reduce corruption. We are working diligently to adjust from recurrent expenditure towards increased investment in growth through the capital budget while focusing on improving efficiencies and productivity for export growth,” Mr Marape said.
This new lending program for PNG is part of a reconfigured relationship between the IMF and Papua New Guinea.
The earlier work under the Staff Monitored Program (SMP) established a track record to allow access to the new emergency funding. The IMF and the international community will continue playing a key supporting role as partners in PNG’s own growth and development reform program.
Prime Minister Marape made it clear that unlike the previous IMF program of the 1990s which was characterized by strict trade and capital markets liberalization, and currency devaluation policy conditionalities, the current support of the IMF reinforces his Government’s home-grown policy based programs and reforms.