Papua New Guinea Asks China to Refinance Debt, Opens Door to Leverage Over Other Strategic Pursuits in Country

On August 6, the Prime Minister of Papua New Guinea, James Marape, requested that China refinance the entirety of its lending to the country, estimated at $7.95 billion (or 32% of Papua New Guinea’s GDP).  The request came after Marape met with Xue Bing, the Chinese Ambassador to Papua New Guinea.  In a statement, Marape’s office said that the Prime Minister had suggested that the Bank of Papua New Guinea, the Papuan Treasury Department, and the People’s Bank of China should engage in consultations towards this goal.

The request comes as local officials are also engaging Australian officials on debt-related matters, with Australia considering supporting an application by Papua New Guinea for financial assistance from the International Monetary Fund (IMF).  In that context, the request to Beijing is suspected by some as a negotiating ploy to seek stronger support from Australia and better terms from the IMF.

The interest in debt refinancing raises corollary concerns with regard to China’s broader strategic interests in Papua New Guinea, ranging from its telecommunications and internet infrastructure to China’s pursuit of increased access to lithium and other mineral reserves in the country.  Officials should be on the lookout for China possibly linking offers of debt relief to preferential access to these materials and approval of other strategic projects pending in the country.

On August 8, Mr. Marape’s office issued a statement describing as “false” allegations that he would target China as the preferred option to refinance Papua New Guinea’s debt. Instead, he said that the government is consulting with the World Bank, Asian Development Bank, and “some other possible non-traditional partners.”