Earlier this week, the Australian Government announced a multi-million dollar initiative to strengthen the banking systems of Pacific Island nations. This move aims to prevent Australian banks from withdrawing their services and to counter potential Chinese influence in the region.
Brian Nelson, the US Treasury’s Undersecretary for Terrorism and Financial Intelligence, while attending the Pacific Banking Forum in Brisbane, Australia this week said in an interview with the media that the US supports this initiative. “The US is a Pacific nation,” he said, highlighting the importance of remittances for Pacific families. He added, “Ensuring formal financial channels remain intact is crucial to prevent illicit actors from exploiting the grey market.”
Nelson also acknowledged the strategic implications, noting, “We are focused on preserving access to the dollar economy and transparent banking relationships.”
“It is about just the basic fact that so much of the global economy relies on the dollar and if you don’t have access to that, that’s going to inhibit your capacity to grow your economy if you’re a country, ” he added.
He warned that the absence of such connections could invite “illicit finance actors” to fill the void. Nelson did not label China as one of those illicit finance actors when asked by media though he said that the US is concerned with China’s support for allowing “goods that are supporting Russia’s war in Ukraine, for example, to flow through their [banking] system.”
This financial aid by Australia reflects a broader effort to maintain economic stability and security in the Pacific amidst growing geopolitical tensions with China.
In a related development, Kilisitina Tuaimei’api, CEO of the Tonga’s Ministry of Finance attended discussions with the World Bank team at same Pacific Banking Forum in Australia to draft the ‘Pacific Strengthening Correspondent Banking Relationships (CBR) Project’ for approval by the World Bank next month.
The CBR project aims to provide temporary correspondent banking services to financial institutions in eight Pacific Island countries, including Tonga, which are facing a complete loss of CBRs in key currencies. The project will be implemented by the Pacific Island Forum Secretariat.
Speaking at the Pacific Banking Forum, Pacific Island Forum Secretary General, Baron Waqa, said that this declining correspondent banking relationships in the Pacific, significantly affecting both the US Dollar and Euro currencies, has been a challenge for the region over the past decade.
