PNG prime minister says terms, not alliances will sway debt deal talks

SYDNEY (Reuters) - Papua New Guinea (PNG) Prime Minister James Marape said on Monday he will accept debt assistance from any country that offers the best terms, ratcheting up pressure on Australia to offer a sweetened deal to protect its standing in the region.

Marape said this month PNG was in talks with China about refinancing its 27 billion kina ($7.75 billion) debt, stoking alarm in the West about China’s ability to use loans to increase its influence in Asia and the Pacific.

Marape later said he was talking to several parties. On Monday, he said PNG was not wed to old alliances and the terms of any debt relief offer would be critical.

Asked which country PNG would forge debt ties with, Marape told the Australian Broadcasting Corporation: “Whether it is China, India or Australia - the cheapest help that we can get and the best help.”

“I’m in the business of refinancing my entire loan portfolio.”

Although PNG is rich in natural gas, crude oil, gold and copper, among other commodities, revenues have been hit by a downturn in global commodity prices.

Its total public debt was equivalent to about 31% of the value of its gross domestic product (GDP) as at the end of June, the government said in a mid-year budget update last month.

The fiscal deficit at the end of June was 1.67 billion kina, equivalent to 1.9 percent of GDP.

Marape’s comments came just hours before he was set to meet a delegation of senior Australian lawmakers, including Foreign Minister Marise Payne and Minister for Finance Mathias Cormann, traveling to PNG for discussions.

Australia has long been the largest donor to PNG. Data for 2017/18 (July/June) showed its development assistance was nearly 70% of PNG’s total official development assistance, equivalent to about 8% of the budget.

Marape said he was not looking for more aid. Instead, he said Australia could adjust its spending so a greater proportion would go to propping up PNG’s budget.

Should Australia fail to strike a deal, PNG could forge closer ties with China.

PNG has in recent years turned increasingly to China for financing. China built a particularly strong relationship with PNG’s former prime minister, Peter O’Neil.

O’Neil was the first Pacific leader to sign up to China’s Belt and Road infrastructure-building program. He met President Xi Jinping more than a dozen times during his time in office, raising concern in Australia that its influence in PNG was waning.

Reporting by Colin Packham; Editing by Robert Birsel