Lowy Institute report finds Canberra has become leading source of loans to region while Beijing’s financing is ‘strategically targeted’
Australia dramatically increased its overall support to the Pacific in 2021, while Beijing is targeting its development financing to “the most China-friendly Pacific island states”, the latest Lowy Institute Pacific Aid Map shows.
Alexandre Dayant, a Lowy Institute research fellow and project director of the Pacific Aid Map, said the map revealed a “new era” of development financing with supporting nations introducing new financing instruments. In the past, Pacific development financing relied heavily on grants from donors for governance and human development. This has shifted, with donors increasing their use of direct budget support and loans to deliver ODF, the Lowy Institute said.
In 2021, Papua New Guinea was the top aid recipient, receiving nearly half of all financing , followed by Fiji , Solomon Islands and. The most aid received per capita went to Tuvalu and Niue with Papua New Guinea ranking last per capita, even though the overall amount was highest. With Pacific Island states facing enormous infrastructure financing gaps, China’s once dominant role has dwindled as Australia and like-minded partners provide more support in the region. Between 2008 and 2021, China was the third largest Pacific donor, but only the seventh largest for 2021 alone.