Tonga’s Prime Minister Akalisi Pohiva has cautioned Pacific Island nations, saying they should “slow down” asking China for loans.
Speaking on the sidelines of the one-day Forum Foreign Ministers conference in Apia last Friday, the Prime Minister told Samoa Observer in an exclusive interview that the debts that Pacific Island states owed to China should be on the agenda at next month’s Pacific Islands Forum (P.I.F.) Leaders Summit in Nauru.
“Each of the Pacific Island (states) owes debts to the Chinese Government and this should be an issue on the agenda of the Pacific Islands Forum Leaders meeting next month.
“This should be an issue where the Pacific leaders should dialogue and open discuss ways to deviate from this predicament. We need to discuss the issue.
“All the Pacific Island countries should sign this submission asking the Chinese government to forgive their debts and to me that is the only way we can all move forward, if we just can’t pay off our debts,” he said.
Tonga reportedly owes the Chinese government $160 million in debts and had its request for the deferral of the loan repayment or their conversion into grants knocked back by Beijing.
Mr Pohiva, during the interview, confirmed the stalemate with the Chinese government and revealed that they will start repaying the loan next month.
“Nonetheless, we will start paying the principals for the loans. By September, 2018, we anticipate to pay $14million, which cuts away a huge part of our budget. We’re supposed to start paying last two years, but we couldn’t afford it, hence the delay and we will pay this year.”
The loan from the Exim Bank of China was used to rebuild Nukualofa after the riots in 2006. Mr Pohiva said Papua New Guinea, Samoa, Solomon Islands and Vanuatu also have loans from China.
Speaking of the debt burden that his country currently faces, Mr Pohiva said he also raised it in a meeting with the Japanese ambassador.
“We’re supposed to start paying last two years, but we couldn’t afford it, hence the delay and we will pay this year.
“The debt burden is so much and I have met with the Japanese Ambassador who is very sympathetic with our situation. Even the Japanese government knows we cannot afford to pay the loans.
“And we have to find ways to comply and that is the cost of being so dependent on the donor partners to do the developments for small island states.”
Pacific Island nations have two options, says the Prime Minister, either they pay off their debts or the Chinese government extinguishes them.
“There are two options either we pay it or forget about it. And what I mean by that is have the Chinese Government forgive our loans.
“One issue for certain is that we don’t want the Chinese government to take the assets used as collateral for the loan, and when we don’t request for loans, we will not be aligned with the developments of the world it is today.”
Mr Pohiva said he is mindful of the consequences of defaulting in their loan repayment, which could see China claiming possession of state-owned assets such as buildings.
“If we fail to pay, the Chinese may come and take our assets, which are our buildings and that is why the only option is to sign a submission asking the Chinese Government to forgive our debts,” he said.
He said some lessons that could be learnt from the Chinese and Pacific nations loans controversy is for the funding recipient to begin debt servicing on time and avoid loans that the national budget will struggle to repay.