Sixteen Years, Two Prime Ministers: Who Ran PNG's Economy Worse?

 

by PAUL L. KEBAIJA

O'Neill squandered a boom; Marape doubled the debt. Sixteen years on, PNG's vast resource wealth still isn't reaching ordinary people.

Neither prime minister turned PNG's resource wealth into broad gains in living standards. Peter O'Neill (August 2011–May 2019) inherited debt at a record-low 16.3% of GDP from the Somare era, plus the LNG boom. He handed over debt of about 40% of GDP and a 2019 deficit his successors called the largest in PNG's history, a figure he dismisses as nonsense.

James Marape (May 2019–present) borrowed through COVID to a debt peak of 52.2% of GDP in 2021, and is now repairing the budget under IMF supervision.

The most damning shared statistic comes from Marape's own Treasurer. Presenting the 2026 budget, Ian Ling-Stuckey forecast living standards would climb back above 2014 levels only in 2025 and 2026. Twelve lost years belong to both men.

Growth: headline booms, household busts

O'Neill's growth figures were real but hollow. GDP grew 13.6% in 2014 and 9.5% in 2015 as LNG exports began, yet non-resource GDP per person fell in each of 2014, 2015 and 2016. Paul Flanagan's Jubilee Australia study found household incomes fell 6% when an 84% rise had been forecast, and employment fell 27% against a promised 42% rise.

O'Neill called the report "fake news". Flanagan blamed a 2013–15 spending spree on anticipated LNG money for crippling the economy.

Marape's growth is broader but still bypasses most workers. Treasury forecasts the longest run of non-resource growth above 4% in PNG's history over 2021–26, and the World Bank put 2025 growth at 5.6%. The same World Bank update found formal employment per person has declined, with most new workers going into subsistence and informal work. The IMF expects growth to halve to 3.1% in 2026 as LNG output plateaus.

Prices, revenue and services

Headline inflation flatters both men. CPI inflation reached 6.9% in 2016 under O'Neill as the kina fell and food costs rose. Under Marape it dropped to 0.6% in 2024, but the central bank governor warned that low headline figures mask underlying price increases, and the IMF expects 4.8% in 2026 even with GST relief extended.

The revenue base collapsed under O'Neill and has only partly recovered. Tax revenue fell from 17.9% of GDP in 2014 to 12.9% in 2016, hit 11.9% in 2020 and was 15.9% in 2023. Treasury now projects domestic revenue of 18.8% of GDP in 2026, while the World Bank's 2026 Public Finance Review says weak resource-sector collection still leaves large sums untaxed.

Education shows the policy whiplash. O'Neill introduced tuition-fee-free schooling in 2012; Marape halved the subsidy in the 2020 budget and made parents pay 37% of fees, then reverted to full fee-free schooling a year later, citing COVID.

Roads tell the same story. Marape's Connect PNG promises K20 billion over 20 years, and a parliamentary inquiry found substantial deficiencies in financial governance after about K4.5 billion was spent. His government in turn says it paid K500 million in unpaid road contract claims left over from 2012–18.

The World Bank review also found little oversight of the district and provincial service-improvement programmes that MPs control, alongside revenue lost to generous tax exemptions.

Debt: one dug the hole, the other deepened it

O'Neill borrowed in good years and changed the law when it bit. Debt rose from K8.5 billion in 2012 to K21.9 billion by 2016, and in 2017 Parliament amended the Fiscal Responsibility Act to tolerate debt of 30–35% of GDP. By 2018 it stood at K29.5 billion, or 35% of GDP, on the 2019 Final Budget Outcome.

Marape's government borrowed faster still. Parliament lifted the ceiling from 35% to 45% in October 2019, and debt rose from K33.7 billion in 2019 to K66.5 billion budgeted for 2026, by the Opposition's count. COVID explains much of that rise; it does not explain the arithmetic.

Treasury's own numbers do not reconcile. Ling-Stuckey told Parliament in August 2025 that debt would end the year at K65 billion and peak at K66 billion in 2026. His 2025 Final Budget Outcome records K68.5 billion at end-2025, or 50.0% of GDP, against the 48.4% claimed in the 2026 budget speech.

The kina and the IMF

O'Neill chose rationing over adjustment. From 2015 the central bank rationed foreign exchange rather than let the kina fall, yet the currency still slid from US$0.488 in 2012 to about US$0.29. ADB research found the government's large deficits contributed to the shortage.

Marape accepted the medicine O'Neill refused. The IMF approved ECF/EFF arrangements on 22 March 2023, and total IMF support will reach about US$1.19 billion if the final reviews pass. The kina now trades near 4.63 to the US dollar, roughly US$0.22.

The ratings agencies are cooler than the Treasurer. S&P and Moody's moved PNG to positive outlooks in mid-2026, but the ratings remain junk at B- and B2: S&P cut PNG to B under O'Neill in 2018 and to B- under Marape in 2020, and Moody's has held B2 since 2016. Kina convertibility, lost in 2015, is still not restored, and the government missed its first-half 2026 deficit target in the run-up to an election.

Resource deals and the UBS loan

The UBS loan is the era's defining failure. In 2014 the O'Neill government took an A$1.24 billion UBS loan to buy Oil Search shares; the inquiry heard it was pushed through against cabinet advice and put to Parliament only afterwards, and the state lost US$432 million. O'Neill was charged in 2023 with giving false evidence to the inquiry, which he denies.

Marape cannot claim clean hands. As finance minister he signed off the loan's approval, the commission found.

Both governments have milked state enterprises. Patrick Pruaitch, O'Neill's former Treasurer, told the 2019 PNG Update that O'Neill's "money grab" had left SOEs with K6 billion in debts, and that Marape was continuing the dividend-maximising habit. O'Neill now says Kumul Minerals was told to pay a K1 billion advance dividend in 2025.

Marape's own resource record is one of delay. His government reopened the Papua LNG agreement signed under O'Neill in April 2019 to win better terms. Seven years on, the final investment decision has slipped repeatedly and is now expected by 15 December 2026.

The bills that never get paid

Some failures span both men. The state owed Nambawan Super K2.1 billion in 2012 and still owed it K2 billion in March 2026, including K204 million to retirees awaiting their entitlements.

O'Neill's priorities were indefensible in a cash-strapped state. His government bought 40 Maseratis and three Bentleys for APEC 2018, and years later only two of the Maseratis had sold.

Marape's governance record has worsened on measurable tests. A pay cut officials blamed on an administrative glitch sparked the January 2024 riots, which killed at least 22 people. The FATF grey-listed PNG on 13 February 2026.

PNG's Open Budget Survey transparency score dropped to 46/100 in 2025. O'Neill says the central bank overdraft facility has grown from about K200 million to nearly K2 billion under Marape.

Verdict

The answer depends on the test, and both men fail it. Judged on what each did with what he inherited, O'Neill's record is worse: he received record-low debt and PNG's biggest resource windfall, and left a shrinking non-resource economy, a rationed currency and a US$432 million loss. Judged on the burden passed to the next government, Marape's is heavier: debt roughly doubled in kina, a grey listing, and a repair that still leans on IMF money.

Each has a real defence. O'Neill says his debts built infrastructure and that he left K28 billion, not the K39 billion Marape alleges. Marape says he quit O'Neill's cabinet over his "appetite for unsustainable debt", absorbed COVID, cut the deficit from 8.9% of GDP in 2020 to 2.1% in 2025, and delivered the first primary surplus since 2011.

Neither defence answers the World Bank's finding that formal jobs per person are falling. Both men sat in the cabinet that approved the UBS loan.

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Paul Kebaija is the senior writer for PNGBlogs