The country’s new prime minister James Marape – himself found by PNG’s ombudsman to have engaged in “wrong and improper conduct” –  established the inquiry this week.

The move deepens political turmoil in the resource-rich but poverty-stricken South Pacific country that resulted in the resignation of previous prime minister Peter O’Neill just a month ago,

The ombudsman’s report investigated a string of allegations concerning the government’s decision in 2014 to borrow $1.2bn from the Australian branch of the Swiss bank UBS.

The loan was taken out to enable the government to buy a 10% stake – 150,000 shares – in the Australian Stock Exchange-listed energy firm Oil Search.

PNG is estimated to have lost about $420m on the deal after being forced to sell the shares when their price fell in 2017 amid a commodity slump.

The ombudsman concluded that nine individuals “failed to comply with the proper process and procedures” in law relating to the loan.

It found O’Neill had engaged in multiple “wrong and improper” acts, including a failure to present the loan proposal to parliament as required by the country’s constitution.

The ombudsman’s report said other ministers – including Marape, who was then minister for finance – engaged in conduct that was “wrong and improper”, and was highly critical of UBS, which is now reportedly under investigation by a Swiss regulator over the loan.

Among the 14 “irregularities” identified by the PNG watchdog was the fact that the loan itself exceeded PNG’s legislated GDP to debt ratio of 35%.

Marape was appointed prime minister by MPs at the end of May after a divisive period of high-level defections and bitter disputes in parliament culminating in O’Neill’s resignation.

The former prime minister is a controversial figure whose business practices have been dogged by scandal.

Marape was a key minister in his government whose own defection to the opposition in April accelerated O’Neill’s departure.