Peter Costello

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Loan to PNG: Release of Second Tranche

NO.018

Loan to PNG: Release of Second Tranche

The Australian Government has announced the release of the second US$10 million tranche of its US$30 million loan to PNG. The loan was agreed in December 2000 and the first US$10 million tranche was released on 19 December 2000.

The US$30 million loan, and the Government’s earlier loan of US$80 million loan in June 2000, have been provided to Papua New Guinea in support of its agreement with the IMF on a US$115 million Stand-By Arrangement and the World Bank on a US$90 million Structural Adjustment Loan.

The decision to release the second tranche of the loan in advance of the IMF’s completion of the second review of its program reflects a desire to assist PNG in addressing its temporary budget financing difficulties resulting from unanticipated delays in the disbursement of external assistance initially expected before the end of 2000. It follows the successful completion of review missions by the IMF and World Bank to Port Moresby earlier this month. These missions noted the continuing progress of Papua New Guinea in implementing its wide-ranging Structural Adjustment Program.

Prime Minister Morauta has indicated that, while there have been some delays in implementing some of the benchmarks under the Program, including for privatising PNG Banking Corporation, the main objectives of the reform program are being achieved. Further progress in the privatisation of PNG Banking Corporation is anticipated prior to IMF Board consideration of the third review under the Stand-By Arrangement, expected in late April. The successful completion of this review would trigger the release of the third US$10 million tranche of the US$30 million Australian loan.

The release of the second US$10 million tranche of the December 2000 loan is a further demonstration of the Australia Government’s continuing confidence in the reform program of Prime Minister Sir Mekere Morauta, which has recorded significant achievements in the past year and a half. These include measures to establish fiscal prudence and financial stability, delivery of services to rural areas, institutional and public sector reform, privatisation and forestry sector management.

CANBERRA
23 March 2001

23 Mar 2001

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