Australia has refused an urgent plea from Papua New Guinea for more time to repay its loans or more aid.
But Canberra has agreed to redirect 20 million US dollars in aid funding into emergency essentials.
At an Australian-PNG ministerial forum in Port Moresby, Australia's Foreign Minister Alexander Downer heard that PNG was struggling to service the repayments on its massive international loans.
The news agency, the Australian Associated Press, reports that Mr Downer told the PNG government that any rescheduling of loans would undermine international investor confidence in Papua New Guinea.
But he said the request would still be passed to the Australian Prime Minister, John Howard.
On the issue of aid, Mr Downer asaid Canberra would not provide any more funds, but it would agree to the money being re-directed.