Papua New Guinea

Key trends and development challenges

Papua New Guinea (PNG) is a developing state located in the Pacific sub-region of Melanesia. With a GDP of $31 billion, PNG is the largest economy in the Pacific Islands and accounts for 73% of regional GDP. Papua New Guinea has a population of 10.4 million, resulting in a GDP per capita of $2,966, the third-lowest in the Pacific. Its exclusive economic zone (EEZ) spans 2.4 million square kilometres, the 19th-largest globally, comparable in size to the EEZ of Norway.

PNG has the lowest official development assistance (ODA) to gross domestic product (GDP) ratio in the Pacific Islands region, with aid accounting for 4% of GDP. In a global context, PNG has only moderate levels of ODA reliance, with its aid as a share of GDP ranking 65th among 125 developing countries. The PNG government’s development agenda highlights agricultural reform, expansion of road networks, and improvements to the healthcare sector as its key priorities. At 0.576, PNG’s Human Development Index score ranked 160th out of 193 countries, and is the lowest in the Pacific.

Between 2008 and 2023, annual official development finance (ODF) disbursements to PNG — including grants, loans, and other forms of assistance — averaged $1.3 billion. PNG has seen a dramatic increase in total ODF received since 2019, with total funds more than doubling since 2017. This uptick in ODF was driven in large part by annual budget support loans from the Australian government, as well as Asian Development Bank pandemic recovery loans.

Almost half (44%) of the development finance received by PNG between 2008 and 2023 came in the form of loans. As a share of total received development support, loan-financed projects have increased significantly. Between 2008 and 2015, loans accounted for around a third of total ODF. Since 2016, this has increased to more than half.

Development partners and sector trends

Three-quarters (74%) of the ODF support to PNG in 2023 came from its largest three development partners, led by Australia (62%), the Asian Development Bank (8%), and China (4%). Australia’s largest ODF disbursements to PNG have all been budget support measures. The portion of PNG’s total ODF provided by multilateral agencies changed dramatically in the wake of the pandemic. Prior to 2020, multilaterals made up a quarter of support received by the country. From 2020 onwards, the share has jumped to more than a third, with the uptick driven largely by increased support from the Asian Development Bank.

ODF in PNG was broadly consistent with regional trends in terms of sector distribution. PNG’s only major sectoral outliers are in the health, transport and industry, and mining and construction sectors. Spending on projects focused on infrastructure overtook education and health in 2013, a trend maintained through to 2023.

Since 2008, PNG has received $778 million in development financing with a “principal” focus on either climate adaptation or mitigation. Over this same period, the country has seen $1.9 billion in development financing with a “significant” focus on climate outcomes. Over the past decade, PNG has seen a substantial rise in spending on climate-targeting projects. As a share of total ODF received by PNG, “principal” climate projects made up just 4% of total spending, well below the regional average of 8%. Conversely, spending on “significant” climate projects in PNG made up 9% of incoming funds, only slightly below the regional average of 11%. The difference in country and economy size between PNG and the rest of the Pacific accounts for these differences.

Between 2008 and 2023, PNG received $275 million in development financing with a “principal” focus on gender equality, and $5.7 billion in development financing with a “significant” focus on gender equality. “Principal” gender equality financing constituted 1% of ODF received by the country, in line with the regional average. Conversely, “significant” marked gender financing made up 27% of incoming ODF, well above the regional average of 22%. This high share is largely a product of gender equity goals being included in major budget support programs, somewhat distorting the picture. The largest project directly targeting gender equality in PNG was the multi-year $42 million Gender Equality and Gender-Based Violence initiative, funded by Australia.