PNG Kina Photo: RNZ Pacific/ Koroi Hawkins
The Bank of Papua New Guinea says the country's total debt at the end of June was 51 billion Kina about US$14 billion and is expected to increase.
The Bank of PNG's acting governor Benny Popoitai said the increase in the debt level over the years had resulted in higher debt service payments.
"This is a major expenditure item in the Government's budget and is an opportunity cost to providing services to the people," Popoitai said.
He said while debt increased significantly over recent years, the majority of foreign debt is concessional, with low interest and long-term maturities.
He said this implies the burden of debt repayment is shifted to the future, at the expense of future generations.
The debt is expected to reach $54 billion kina by the end of the year, which is around 53 percent of the Gross Domestic Product.
Popoitai said therefore any new borrowings should be put to productive use to grow the economy, especially the non-mineral export sector, to increase the Government revenue base and foreign exchange earnings to repay future loan obligations.
"The Government should seriously consider net retirement of some debt from windfall tax revenue and reduce the budget deficit to ensure that debt level is sustainable to achieve fiscal consolidation in the medium term," he said.
- The National