PNG Government Moves Early to Tackle K2.25 Billion Eurobond Repayment

With a K2.25 billion debt payment approaching in August 2028, the PNG Government has begun discussions with major international financial institutions to find a more affordable way of meeting the obligation.

Treasury Minister Ian Ling-Stuckey confirmed that the World Bank and International Monetary Fund (IMF) had been approached during meetings in Washington DC last week, with negotiations focusing on refinancing options that could reduce the country's borrowing expenses.

 PNG Government Moves Early to Tackle K2.25 Billion Eurobond Repayment/Photo supplied

The debt relates to a US$500 million Eurobond secured in 2018, which the Minister said had placed a heavy financial burden on the Government.

At an interest rate of 8.35 per cent, excluding additional fees, the loan costs taxpayers almost K200 million annually in interest alone.

The repayment terms also require the Government to settle the entire principal in August 2028 rather than paying it off through regular instalments.

Mr Ling-Stuckey said the debt had contributed to PNG's classification as being at high risk of debt distress, making it necessary for the Government to explore alternative arrangements before the maturity date.

He said early action was particularly important given the 2027 National General Election and the lengthy processes involved in negotiating concessional financing and securing international guarantees.

One of the key proposals raised with the World Bank was the use of loan guarantees to make borrowing from commercial financial institutions less expensive.

The World Bank Group could potentially cover up to 95 per cent of eligible losses under such an arrangement, reducing the financial risks faced by lenders and improving the terms available to PNG.

The Government also used the discussions to raise possible financing assistance for major resource developments, including State participation in the Papua LNG project.

A technical team from the World Bank is scheduled to travel to Port Moresby during the week beginning November 9 for further consultations with PNG Treasury officials.

Mr Ling-Stuckey welcomed the planned visit, saying it provided an opportunity to advance discussions on affordable financing.

The IMF discussions, meanwhile, focused on the seventh review of PNG's programme with the institution, which is expected to reach the Executive Board in early December.

According to the Minister, resolving outstanding issues ahead of the review would help the Government access additional financial resources to support the 2026 National Budget.

The meetings also examined whether existing IMF funding programmes, including the Extended Credit Facility and Extended Fund Facility, could continue.

Another proposal involved a standby or contingent financing facility that would give PNG access to financial support if unexpected economic challenges emerged.

Such an arrangement could also help protect the country against financial risks associated with refinancing the Eurobond.

Mr Ling-Stuckey said the Government's progress in implementing IMF-backed reforms had strengthened its relationship with international financial institutions and improved its prospects of securing further assistance.

He said continued engagement with the World Bank and IMF was necessary to maintain economic stability, manage public debt and reduce the financial costs of past borrowing decisions.

The Minister said the Government was determined to use its international partnerships to find a sustainable solution before the K2.25 billion Eurobond repayment becomes due in August 2028.