Australia reviews PNG aid

Australia reviews PNG aid

CANBERRA (AFP): Australia's chief diplomat has warned Papua New Guinea and other Pacific island states they must take hard economic decisions or face a loss of investor confidence and lowering of living standards.

Department of Foreign Affairs and Trade secretary Michael Costello also said Australia would be reviewing its A4300 million (US$220 million) a year bilateral aid treaty with PNG later this year.

Australia would have Papua New Guinea's attitude to a proposed World Bank restructuring package "very much in mind" during the review, he said.

Costello's warnings followed a World Bank report which found major obstacles to foreign investment in the island states.

World Bank director Marianne Haug also told South Pacific finance ministers meeting in Fiji that stricter discipline was needed to cut waste and enable more money to be spent on human resources, infrastructure and other developments which promoted growth.