Aid expert downplays “debt trap” fears in Pacific

APIA, 28 NOVEMBER 2018 (SAMOA OBSERVER) – An expert on foreign aid in the region says fears of Pacific Island nations getting caught in debt traps is “overstated”.

The statement comes on the back of the recently concluded Asia-Pacific Economic Cooperation (APEC) Leaders Summit in Port Moresby, PNG—where both Australian Prime Minister Scott Morrison and U.S. Vice President Mike Pence warned Pacific Island governments—against getting foreign loans from China.

Jonathan Pryke, the Pacific Islands Programme director at the Lowy Institute in Sydney, told Samoa Observer he is not convinced that Pacific Island governments can get caught in debt traps put in place by foreign aid donors.

He said data collated in the Lowy Institute’s Pacific aid map showed that between 2011 and 2016 Samoa received a total of $US834 million in foreign aid, which equated to about 17 per cent of the country’s gross domestic product over that same period.

About two thirds of China’s aid to Samoa was in the form of loans, added Pryke, and that is on top of loans that the country took from the Asian Development Bank, the World Bank and Japan, as well as domestic debt.

When he was asked on “debt traps” and if he saw that impacting the Samoan Government over the long-term period, he said: “While China’s debt is a nice piece of economic leverage, I am not convinced about the argument of debt traps caused by foreign donors.

Samoa is still in a position to pay back their loans, as PM Tuilaepa stressed at his address at the Lowy Institute in August.”

A paper published early this month by researchers Rohan Fox and Matthew Dornan at the Australian National University’s Development Policy Centre argued that the “debt-trap diplomacy” argument was without foundation.

Pryke, when asked by this newspaper what he thought of their proposition, said: “Yes, I think their analysis is legitimate. Debt is an issue for Pacific nations, and many of the smaller countries have been pushed to their debt limits by a number of donors, including China. But the narrative on debt traps is, in my opinion, overstated.

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