Pacific nations’ growing indebtedness

The Lowy institute has expressed concern about the Pacific nations’ growing indebtedness.

The report surveys Pacific states for a breakdown of the aid and loans they have received from China. It states that China’s aid to Pacific nations over five years totals just over $NZ800 million. The bulk of China’s aid is through soft loans for infrastructure projects.

It expresses concern at the level of debt some of the poor Pacific states, especially Tonga, are accumulating. Its debt to China is 32 per cent of its GDP.

The institute noted China was not the only lender in the Pacific. The Asia Development Bank reported a total of public and private loans to the region of $2.8 billion in 2009. “There is anecdotal evidence some island countries are taking on Chinese loans with the expectation that China will forgive the debts after an appropriate time has elapsed and if requested.”

The Lowy Institute is an independent international policy think tank based in Sydney. Its objective is to generate new ideas and dialogue on international developments and Australia’s role in the world.


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