A new report from Australia’s Lowy Institute has raised concerns over the increasing reliance on loans for development funding in the Pacific.
The seventh edition of the Pacific Aid Map, released last month, analyzed over 37,000 projects financed between 2008 and 2022. It highlights a shift from grants to loans, which now account for 60% of infrastructure financing in the region.
“While 75 percent of these loans are directed to the region’s largest economies, such as PNG and Fiji, the remaining quarter is allocated to smaller economies, a majority of which already face elevated debt risks,” the report stated.
The report found that Official Development Finance (ODF) flows in 2022 were 19% above pre-pandemic levels but noted a record 18% contraction in Pacific aid.
Australia remains the region’s top donor, though its grant contributions have declined. China has regained its position as the second-largest bilateral donor, surpassing the United States.
The report warns of uncertain development prospects amidst economic fragility and geopolitical pressures.
