The government's regional strategic partnership fund will stump up $2.9 million to help with the expansion of a gin and vodka distillery on the shores of Lake Dunstan, in Central Otago.

The investment, in the form of a convertible loan, will be put towards expanding the $25m Scapegrace distillery, helping it meet growing international demand for its product range.

It's not the first government venture into the booze industry.

West Coast gin and botanical spirits producer Reefton Distilling Co tapped into $1m in funding from the then $3 billion Provincial Growth Fund in September 2020, also for expansion purposes. 

Scapegrace's owner, The Gin Company, bought the 36-hectare site near Cromwell in 2019, and it gained resource consent in June 2021. 

The distiller is known for its award-winning gin and vodka and its first two buildings, which cover 4,500 sq metres, house a bottling hall, warehouse, barrel room and offices.

Regional development minister Kiri Allan said the expansion will create 218 jobs during the construction stage, as well as 24 permanent roles once it's up and running.

The money will go towards finalising the second stage of the development, which is expected to open in October this year.

Government funding of $4.5m will also go towards underwriting the construction of Silverlight Studios outside Wānaka.

That's nearly a quarter of the $20m Queenstown economic transformation and resilience fund, which aims to support businesses not necessarily directly aligned with tourism.

Allan said the studio support will help with operational costs following its initial development costs.

An additional $3m has gone into building the new James Cumming Community Centre and Library in Gore.