Samoa’s significant debt singled out
Samoa has been singled out as having significant debt to China and is at a high risk of external debt distress.
This is according to the United States-China Economic and Security Review Commission staff research report.
The report also places Tonga under this category with both countries having a gross domestic product of 52 and 42 per cent respectively.
It said aggressive Chinese lending in the region is increasing the debt burden of Pacific Island countries to unsustainable levels, with “several Pacific Island governments struggling with high debt levels and have established ‘no new loans policies’ as a result”.
While some Pacific Island leaders prefer Chinese aid over their traditional leaders, Chinese foreign aid comes with conditions and “to qualify for concessional loans provided by the China EximBank, the contractor must be a Chinese company and at least 50 per cent of project materials have to be sourced from China”.
Despite only directing 4 per cent of its global aid to the Pacific Islands, it is still a key source of development assistance for its eight diplomatic partners in the region, including Samoa and Tonga where it provided about 30 per cent of total overseas development assistance between 2006 and 2013, and almost half to Fiji.
Estimates from the Lowy Institute, the report said “China provided $1.7 billion in cumulative aid to its Pacific Island diplomatic partners from 2006-2014, second behind Australia’s $6.9 billion assistance and ahead of the U.S.’ $1.6 billion.
“More than 80 percent of Chinese aid has been in the form of concessional loans, which have long-term repayment periods and typically are used to fund infrastructure projects, while the rest are grants.”
The report further stated that from 2000-2014, China’s development assistance on transport and storage projects was about 23.4 percent or $717 million and promoting government efficiency was about 15.6 percent or $480 million, and its assistance also comes in the form of humanitarian assistance and disaster relief to countries in the region that are prone to severe weather events.
Quoting China’s ambassador to Vanuatu, Liu Quan, it said: “China expects its Pacific Island diplomatic partners to support Chinese positions at the U.N. in return for its assistance”, noting ‘there is no free lunch’.”