4 April 2022
Pacific Island states are facing a serious debt crisis that has been worsened by the pandemic and the consequent shutdown of the tourist industry, according to a report published by Jubilee Australia and partners in advance of this week’s Pacific debt conference in Suva.
The report comes as Pacific Island governments at the sharp end of the climate crisis will meet with their creditors on 5 April for an unprecedented regional debt conference that aims to find innovative solutions to the twin crises facing the region. At the conference, Pacific Island governments will attempt to find solutions to the debt and climate crises, including innovative financial instruments and debt-for-climate swaps.
The report urges creditor nations and institutions to take action now to avoid a debt crisis in the Pacific, starting with ensuring a productive discussion at the conference focused on the issues and potential solutions.
‘This is a unique opportunity for debtors and creditors in the Pacific to sit down and address the interrelated challenges brought by the COVID-19 pandemic, the climate crisis, and development needs’, said Luke Fletcher, Executive Director of Jubilee Australia. ‘Goodwill will be needed on all sides, but particularly from creditors–including Australia—so that Pacific Island countries are not left to struggle with unsustainable debt while they meet the challenge of the climate crisis’.
The tourism-dependent economies of Fiji, Palau, Samoa, Tonga and Vanuatu saw a significant drop in income over the past two years with a collective 13.7 per cent fall in GDP in 2020 and 2021 alone.
The IMF considers seven Pacific countries as being at high risk of debt distress: Kiribati, Marshall Islands, Micronesia, Papua New Guinea, Samoa, Tonga and Tuvalu.
The largest single creditor for countries for which the World Bank publish disaggregated data is the Asian Development Bank (holding 38% of all foreign debt claims), followed by China (22%), the World Bank (13%), bondholders (7%), Australia (6%) and Japan (6%).
The conference takes place between 5th and 8th of April in Suva, Fiji, and will be attended by a wide range of creditors including states, multilateral lenders and bondholders, and debtors.
Download the report: Debt Challenges in Pacific Island Countries and Resolution Options
The Pacific Islands Forum Secretariat and the United Nations Economic and Social Commission for Asia and the Pacific are convening the first Regional Debt Conference to address debt sustainability in the Pacific in the aftermath of COVID-19. The conference will run for 4 days from 5–8 April in Suva, Fiji. It will be a hybrid in person/remote participation event. Jubilee Australia will be presenting on the final day of the conference (Friday 8 April).
The report, prepared by Jubilee Australia, Eurodad, Jubilee Debt Campaign UK and Erlassjahr.de (Jubilee Germany), recommended a number of potential solutions to the delegates at the regional debt conference, including:
- Access to finance and debt relief to be based on broader criteria than just income per capita.
- A debt payments moratorium and comprehensive restructuring in response to external shocks (including and especially climate-related extreme events).
- A comprehensive debt architecture reform including more transparency for loans, a review of the debt sustainability frameworks and a permanent multilateral sovereign debt resolution framework.