PNG'S 'credit-worthiness '
pp. 18-19 · Read in the full issue
World Bank's re-think on PNG'S 'credit-worthiness '
PIM last October gave an exclusive report on the surprise decision by World Bank president Robert McNamara that an independent Papua New Guinea would be con sidered “uncreditworthy” unless the Australian Government guaranteed her loans.
The decision caused ill-feeling in the PNG Government; nor was it supported by many senior officers of the World Bank. Bank officials felt that if PNG was independent then it could hardly be expected to take kindly to the suggestion that it should still be tied to somebody else’s apron strings. In any case, they felt, PNG was “creditworthy” on its own
account; it had greater potential than many countries getting independent loans from the World Bank.
So in an attempt to counter the ill-feeling in PNG, a three week economic survey mission from the bank visited PNG in January- February. Its purpose was to review the earlier decision and if possible to reverse it. It was in fact something of a face-saving mission for Mr McNamara.
The mission’s leader, Mr George Baldwin, will be recommending favourably on PNG’s situation, and will advise Mr McNamara to reverse the earlier situation. Mr McNamara is expected to act promptly, but it still could be some months before the machinery starts working and the way is open for substantial amounts of aid to be made available to PNG from World Bank sources.
Meanwhile, in a decision which not only came as a pleasant shock to PNG Prime Minister Michael Somare, but which also caused sur prise in official circles in Canberra and Port Moresby, Australian Prime Minister Malcolm Fraser announced on March 4 that Australia would give PNG at least $930 million in Australian aid over the next five years.
Officials of both governments had been expected to meet in Canberra in mid-March to hold discussions on long term aid arrangements.
At that meeting levels of aid for future years were expected to have been decided. Fears were held in Port Moresby however that hard liners in the Australian Treasury would use the poor state of the Australian economy to justify an un reasonably low level of aid to PNG.
This fear perhaps lay behind PNG Opposition Leader Tei Abal’s call in February that Mr Somare, Sir Maori Kiki and Mr Julius Chan should go to Canberra to discuss future levels of aid with Mr Fraser.
It is understood that Mr Somare wrote to Mr Fraser in late January expressing serious concern at the state of Australian-PNG relations and specifically seeking a meeting to discuss the question of future aid. It was not however expected by PNG officials that the meeting which finally took place in Canberra on March 4 would be so productive.
Mr Fraser told Mr Somare at that meeting that, in determining the allo cation of aid funds, Australia would continue to give the highest priority to providing aid to PNG on a sub stantial scale to assist it towards its objective of self-reliance.
Mr Fraser undertook that Australia would provide a minimum of $lBO million in social and economic aid to PNG for each of the five years beginning on July 1, 1976. It would also provide further annual supple ments in the light of prevailing cir cumstances.
He said the supplement in 1976-77 would be $lO million and $2O mil
lion in 1977-78, giving aid total for 1976-77 and 1977-78 of $l9O million and $2OO million respectively.
In addition to the above levels of aid, Mr Fraser undertook to make additional payments to cover among other things the Wabo hydro-electric feasibility study, payments relating to war pensions and cemeteries, and expenditures to cover completion of the current airport construction works at Port Moresby and Nadzab.
Australia is also obliged by legis lation to make payments under the Employment Security Scheme which provides termination benefits to for mer expatriate employees of the Government of Papua New Guinea and which are estimated to cost $37 million in 1976-77 and $2l million in 1977-78. Other Australian assist ance which lies outside the basic aid figure is the Australia-Papua New Guinea Training and Education Scheme, estimated to cost $1.2 mil lion in 1976-77.
Australian assistance to Papua New Guinea in 1976-77, for what are termed economic and social pur poses, will therefore exceed $195 million, an increase of $33 million on the 1975-76 level of $162 million.
Australia’s previous Labour Government had agreed to give PNG $5OO million in aid over three years.
The agreement still has a year to run, though with aid of $195 million for 1976-77 it has been more than achieved.
Mr Somare warmly welcomed the “new and generous long-term aid commitment by the Australian Government” which he said the PNG Government found fully acceptable, as well it might. He also stressed that PNG would in no way be relaxing its serious attempts to live within its means in the years ahead. He has repeated this last point on a number of occasions since his meeting with Mr Fraser, and it is doubtless one on which Australia will be looking for some tangible progress in the next few years.
The Prime Ministers also discussed an earlier Australian Government offer whereby the Australian Reserve Bank would provide a $3O million standby to the Bank of PNG to assist PNG to support its new currency.
The $3O million offer is understood to have been rejected as being low by Mr Somare in his January letter to Fraser. Mr Fraser has now offered to increase the standby arrangement to $6O million, but it is not yet known whether this figure will prove acceptable to Papua New Guinea.
The two leaders also discussed telephone services between Australia and PNG, the Torres Strait question, the situation on Bougainville and other foreign policy issues.