Papua New Guinea
- Total external debt: $1.85 billion (World Bank, 2005)
- Total external debt payments: $388 million (World Bank, 2005)
- Population: 5.9 million (World Bank, 2005)
- Percentage of adults who can read and write: 57.3% (HDR 2005)
- Average life expectancy: 56.9 years (HDR 2005)
- HIV prevalence: 0.8% (HDR 05)
- Total health spending: 3.0% of GDP (HDR 04)
- Total spending on debt service payments: 6.70% of GDP
- Annual GDP: $7.92 billion (HDR 2005)
Papua New Guinea (PNG) occupies the eastern part of the world's second largest island, which is prone to volcanic activity, earthquakes and tidal waves. Some 80% of Papua New Guinea's people live in rural areas with few or no facilities, and many groups live in isolation in the mountainous interior.
Political and economic history
PNG’s forest, mineral and marine resources have meant it has been sought after since Portuguese explorers came across the island in 1527. It has been at different times under the control of the Dutch, Germans and British, and continues to have strong ties with its southern neighbour, Australia, which administered the territory between WW2 until independence in 1975.
The British Queen remains official Head of State, while former independence leader Michael Somare is the current Prime Minister, having come to power in August 2002.
Where has the debt come from?
Much of the debt of poor countries like PNG is left over from the 1970s and often arose through reckless or self-interested lending by the rich world. Financial markets were awash with money following the oil price hikes in the early 70s, much of which was lent on to poor countries. But when interest rate rises and commodity price collapse followed in the 1980s, many countries were left with debts they simply could not repay.
PNG has largely not been able to exploit its natural resources for its people’s benefit and to help ameliorate its debt burden. PNG remains a very poor country. Around 40 percent of Papuan New Guineans live on less that US$1 per day, many people do not have access to essential services and basic infrastructure is poor. Mining is the country’s main industry but only delivers an eighth of GNP and employs less than one per cent of the workforce. The sale of mining rights to foreign companies has been a source of tension, including a nine-year conflict on the island of Bougainville, which ended in 1997.
Australia has a substantial aid programme in Papua New Guinea which aims to relieve poverty and to boost development in the country. Australia remains its single largest donor and has provided about two-thirds of all aid over the last decade, although the Asian Development Bank, IMF, World Bank and Japan have recently lent to PNG.
Debt cancellation status
Papua New Guinea is officially classed as a low-income country by the World Bank. It is considered to have a 'sustainable' debt: this is measured by the size of external debt in comparison to the value of exports, without taking into account domestic debt or what Papua New Guinea needs to spend on tackling poverty. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative.
The New Economics Foundation calculates that Papua New Guinea requires 85% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Last updated: April 2008