During a visit to Canberra, Peter O'Neill said the facility must eventually close.
Comments from the Papua New Guinea prime minister that Australia's asylum seeker detention centre on Manus Island has hurt the country's reputation have come as no surprise to some.
The newspaper, The Age, reported him as saying his government couldn't afford to resettle those found to be refugees.
It was Mr O'Neill who signed a 2012 agreement with then-Prime Minister Julia Gillard to reopen it.
The Detention Rights Advocate at the Asylum Seeker Resource Centre in Australia, Pamela Curr, said the PNG government, to its credit, had not pushed the people out into the community because they were afraid of what would happen to them.
"Papua New Guinea is a dangerous country even for the local people; it's made up of many languages and many cultures. It is an emerging nation, it is in no fit condition to take in over 1000 young men from many different cultures and expect them to be able to settle there."
Pamela Curr said Australia was destroying its relationships with its neighbours.
Since 2013 Manus has been hosting hundreds of asylum seekers who attempted to reach Australia before being intercepted by its naval forces and transferred to Manus for processing.