The non-government organisation, Water Aid, says only two in five people have access to safe water in Papua New Guinea and this is contributing to wider development issues.
The comments were made at an Australian Senate inquiry into the effectiveness of Canberra's aid in PNG.
A policy officer, Luke Lovell, says over recent decades, the country's development has been minimal despite strong economic growth in the country.
He told the inquiry that part of this lack of progress is due to limited access to water, sanitation and hygiene.
"PNG has one of the lowest coverage rates in the world. Only one in five people use improved sanitation, and only two in five have access to a safe water source. This has a direct affect on people's health, education and productivity. Many girls drop out of school once they start menstruating because of a lack of sanitation and hygiene facilities at school. Given the documented benefits of female education for the girls themselves, their future children and their communities, this is a problem that must be addressed."