PNG Govt debt spiralling

10:22 am on 22 June 2017

An economist says the Papua New Guinea government is facing a debt mountain and most of it is due to the ballooning servicing costs.

Paul Flanagan, an Australian with a long association with PNG economic matters, said the debt is due to the government running the largest deficits in PNG's history, with the latest figures putting the deficit at $US922 million dollars, or about 4.5 percent of the economy.

He said official debt has gone from $US2.6 billion dollars in 2012 to $US6.7 billion in 2016 - an increase of 160 percent.

Economist Paul Flanagan

Economist Paul Flanagan Photo: ANU

Mr Flanagan said mostly the government is borrowing from local banks and the superannuation fund, and financing this debt is a huge burden.

He said in the past the government would go to the market with one year or three year bonds, but it can no longer do this.

"Increasingly, because of the market, they are having to issue one month and three month bonds.

"And that means they have to turn them over every month or every three months - much, much more frequently than in the past," Mr Flanagan said.