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, and accounts for 75% of regional GDP. Papua New Guinea has a population of 10.1 million (2022), resulting in a GDP per capita of $3,000, ranking 11th in the Pacific. Its Exclusive Economic Zone (EEZ) covers more than 2.4 million square kilometres, the 16th-largest globally, and is comparable in size to the EEZ of Norway.

PNG has the lowest Official Development Assistance (ODA) to Gross National Income (GNI) ratio in the Pacific Islands region, with aid accounting for only 2% of national income in 2022. In a global context, PNG has low levels of ODA reliance, ranked 53rd among 127 developing countries for its ODA/GNI ratio. The PNG government’s development agenda highlights agricultural reform, expansion of road networks, and improvements to the healthcare sector. At 0.568, PNG’s Human Development Index score is the lowest in the region, ranked 154th out of 193 ranked countries.

Between 2008 and 2022, annual Official Development Finance (ODF) disbursements to PNG — including grants, loans, and other forms of assistance — averaged $1.2 billion. PNG has seen a dramatic increase in total ODF received since 2019, with total funds received more than doubling since 2017. This uptick in ODF was driven in large part by annual budget support loans from the Australian government.

Almost half (43%) of the development finance received by PNG between 2008 and 2022 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. Only Fiji sees loans make up a larger portion of incoming aid.

Development partners and sector trends

Three-quarters of the ODF support to PNG has come from its three largest development partners, led by Australia (48%), the Asian Development Bank (17%), and China (12%). 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 jumped to 44%, with the uptick driven largely by increased support from the Asian Development Bank during the pandemic.

ODF in PNG was largely consistent with regional trends in terms of sector distribution. PNG’s only major outliers are in the health and mining sectors. Spending on projects focused on infrastructure overtook human development in 2013, a trend maintained through to 2022.

Since 2008, PNG has received $360 million in development financing with a “principal” focus on either climate adaptation or mitigation. Over this same period, the country has seen $1.6 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 make up just 4% of total spending, well below the regional average of 9%. Conversely, spending on “significant” climate projects in PNG makes up 12% of incoming funds, only slightly below the regional average of 13%.

Between 2008 and 2022, PNG received $434 million in development financing with a “principal” focus on gender equality, and $6.8 billion in development financing with a “significant” focus on gender equality. “Principal” gender equality financing constituted 2% of ODF received by the country, matching the regional average of 2%. Conversely, “significant” marked gender financing made up 37% of incoming ODF, well above the regional average of 21%. 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.