The Papua New Guinea government's anti-corruption task force says as much as half of the country's 3.5 billion US dollar development budget over three years has been lost to graft or dodgy overseas investments.
The chairman to Task Force Sweep, Sam Koim, says Australian financial institutions have been complicit by turning a blind eye to dirty monies being redirected to Australian connections.
An analysis carried out by the group found the development budget from 2009 through 2011 shows almost half was lost to corrupt practices by public officials and government departments.
Mr Koim told AAP they have uncovered a lot of instances where there was no recourse to budget and people were spending money left, right and centre, squandering funds and using them for private purposes.
He says they have reason to believe that at least half of the budget they were investigating was wasted, mismanaged or stolen.
He says government systems and control mechanisms have, over time, been corroded.
Mr Koim has also denied local media reports claiming most of the stolen funds had been invested in Australia alone.
However, he says Australian financial institutions had turned a blind eye to transactions and investments from high-profile PNG public servants and politicians on Australian shores.