The World Bank has approved US$100 million (K352 million) in concessional funding to support Papua New Guinea in its response to COVID-19, and ‘lay important foundations for a sustainable recovery’. The funding will not be without risk, however.
The money, provided in the form of ‘highly concessional credit’, will fund the bank’s wide-ranging Papua New Guinea Crisis Response and Sustainable Recovery Development Policy Operation.
The World Bank’s Stefano Mocci
The operation includes several initiatives, including support for the vaccine rollout in PNG, support for the PNG government’s package for small and medium-sized businesses (including reforms aimed at simplifying the tax regime for SMEs), reform of PNG’s state-owned enterprises, the government’s fiscal consolidation program, financial inclusion and climate mitigation.
‘Globally, the COVID-19 crisis has tested the resilience of many economies and PNG is no exception,’ said Stefano Mocci, the World Bank’s Country Manager for Papua New Guinea in a statement.
‘This operation supports the PNG Government’s efforts to strengthen the country’s medium-term fiscal and debt sustainability, improve the efficiency of the financial sector, ensure more people – particularly PNG’s most vulnerable families and communities – have better access to the finance, and to address the impacts of climate change.’
Alignment
The operation is deliberately aligned with the PNG government’s plans.
‘There’s no denying that the COVID-19 pandemic has had a severe impact on our country,’ explained PNG’s Treasurer, Hon. Ian Ling-Stuckey. ‘However, we have been proactive in taking steps to lay out a clear recovery plan to help stabilise the economy, maintain frontline health services and provide support to the business sector, especially those in the MSME space, among others.
‘Beyond the COVID crisis, the Marape Government has made a firm commitment to resume fiscal consolidation to ensure fiscal and debt sustainability and this operation is a strategic partnership with the World Bank to achieve this.’
Risks
While the program will help the country address some significant challenges, the World Bank has been open about the potential risks associated with providing such funding in challenging times.
In publicly available support documents, it concedes that ‘the overall risk rating for the proposed operation is high’, with ‘political and governance risks and macroeconomic risks’ being weighted most heavily.
However, the documents do suggest that ‘the potential value of achieving the PDO [project development objective] is very high, however.’
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All SME are not exclusive to Small. We have here in Disadvantaged provinces with high loan requirements and we are not only small to Medium Enterprises. We are also Micro Business existing and others newly established in rural areas to face the toughest challenges of accessing SME loan with the financial institutions. Can World Bank, IFC and PNG Government funds capital start up grants instead of SME Loan packages. See from Business Link Paciifc which are giving free SME Support Grant to those affected by Covid-19 and Climate change…
Thank you world bank for these funds. Please do not fund the government budgets but rather give the funds to projects only coordinated by you. Waigani swamp is no go zone for foreign funds
SMEs are most affected given limited capital base and reserve cash to withstand impact of covid on their business. Many of the loans have been either in distressed situation or have been charged off. Funds earmarked for the SMEs from this intervention should be used to provide relief for SMEs on the debt obligations. Work with the banks to clear all SME Loan arrears and pay off loans for struggling SMEs