ODA Loan to Support Balance of Payments and Economic Structural Reform of Papua New Guinea
1. Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Yasuda) today extended an ODA loan totaling 5.35 billion yen to Papua New Guinea for its "structural adjustment program" with the signing of an agreement at its head office. As the result of this loan, the cumulative loan approvals to date total 14, with their aggregate value amounting to 62.185 billion yen.
2. The objectives of this loan are to give assistance to improve the balance of payments position and attain macroeconomic stability by providing funds that will finance general imports, and to achieve economic and social structural reforms through supporting the structural adjustment program, with the purpose of regaining confidence in Papua New Guinea's economy.
3. Papua New Guinea was hit by a major drought and earthquake at the end of 1997, which dealt a serious blow to its economy. In addition, gold and timber prices which are major export goods of the country plunged in the world commodity markets. As a result, the country's balance of payments deteriorated, registering a deficit of $204 million in 1997. The economic downturn continued into 1998 and 1999, leading to dire consequences, including a sharp decline in international reserves and growing fiscal deficits. The IMF estimated that the country would face a foreign currency shortage of $300 million in 2000.
4. To improve the economic conditions, the Government of Papua New Guinea will embark on a structural adjustment program with financial support from international donors including JBIC. The program is aimed at improving fiscal control, official debt management, business environment, efficiency in the public sector, health and educational services, budgetary allocations, forest management and efficiency in financial services.
5. The revenues obtained by making use of this loan will be mainly allocated to the four priority areas for development: health and medical care, education, rural infrastructure and the primary industries.