Australia is lending Papua New Guinea more than $US300 million in budget support.
PNG Prime Minister James Marape said it was the first significant concessional loan Australia has offered any country in several years.
The interest rate of 2.5 percent was favourable for PNG and would help the country reform its economy, he said.
Treasurer Ian Ling-Stuckey will soon release the 2020 Budget, which will detail how the new funding will be spent.
"Our country has one of the lowest rates of access to reliable electricity in the world and 60 percent of our people don't have access to safe drinking water," Mr Marape said in a statement Saturday.
"It's why the Australian funding and our reforms are important in assisting us overcome these long-standing challenges."
Australia's Minister for International Development, Alex Hawke, said the assistance reflected the Australian national interest in a stable and prosperous PNG.
It built on the strong economic partnership, which included support for economic reform.
Mr Hawke also said it would also benefit PNG and Australian businesses by increasing the availability of foreign exchange in the country and by supporting trade and investment.
In August, PNG said it was seeking to refinance its entire government debt, and asked Beijing for help.