Australia’s former minister for the Pacific region, Senator Concetta Fierravanti-Wells, has questioned the centre-right Coalition government’s plans to increase investments in infrastructure in the South Pacific.
Fierravanti-Wells told an Australian newspaper that the Morrison government’s move will only add more debt to already struggling Pacific countries, and lessen the countries’ ability to spend money on pertinent local issues.
“Given that the debt in the Pacific is already about A$5.5 billion ($3.87 billion), including about A$2 billion ($1.4 billion) to the Asian Development Bank and World Bank, and A$1.5 billion ($1.06 billion) to Beijing, why are we even contemplating saddling our neighbours with even more debt?”
According to The Australian, Fierravanti-Wells said that lending more to these countries, which have external debt-to-GDP ratios ranging from 25 percent to 90 percent, could threaten the stability of their economies.
Complaint from Beijing
In January, when Fierravanti-Wells was still minister for international development and the Pacific, she told The Australian newspaper that China was lending to Pacific nations on unfavorable terms to construct “useless buildings” and “roads to nowhere.”“You’ve got the Pacific full of these useless buildings which nobody maintains, which are basically white elephants,” she said at the time.
In August, Fierravanti-Wells told the Australian Broadcasting Corporation (ABC) that other Pacific leaders had contacted her with messages of support.
“The reality is that subsequent events have vindicated my position and the concerns I raised,” she told the ABC in August.
Debt Distress in the Pacific
China has transferred at least A$1.8 billion (1.26 billion) in aid and loans to South Pacific countries in the decade through to 2016, the Sydney-based Lowy Institute international policy think tank found.Its Pacific program director Jonathan Pryke told The Australian that Fierravanti-Wells’ concerns are valid.
“It’s a really valid concern and one I know the bureaucracy is concerned about,” Pryke said.
“We will need to be creative in how we structure these loans to ensure we do not contribute further to the debt burdens for these countries.”
With the exception of Papua New Guinea and Fiji, Pryke said other Pacific countries are approaching debt distress.
“A lot of these economies are so small, one loan can take them right up to their debt threshold,” Pryke told The Australian.