NZ Foreign Minister Mahuta concerned with huge debt burden in Pacific

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The unsustainable nature of the high debt burden in Pacific countries is an area of concern for New Zealand, says Foreign Minister Nanaia Mahuta.

Mahuta in an interview with FijiLive said because of high debt levels, they generally encourage Pacific countries to make use of grant finances where possible.

She said Aotearoa New Zealand’s approach to development funding is to provide grants rather than loans, therefore not adding to the Pacific’s debt burden.

“We recognise that taking on debt is a legitimate means for any government to finance development,” she said.

“These in many cases the available level of grant financing is unable to meet the development needs of the Pacific. We remain concerned about the unsustainable nature of the high debt.

“Due to these concerns, we generally encourage Pacific countries to make use of grant finances where possible, and following that, concessional loan finances.

“This includes concessional loan from the International Financial Institutions such as the Asian Development Bank and the World Bank.

“We encourage all partners in the region to support long-term resilience outcomes in line with Pacific priorities and a high degree of Pacific ownership,” she said.

Minister for Economy Aiyaz Sayed-Khaiyum had earlier stated that credible lenders such as the World Bank have lent to Fiji at five times the pace because they are confident in the government plan to revive the economy.

Sayed-Khaiyum said these multilateral institutions knew that the country’s debt burden was sustainable.

“They understood what we understood that we needed a balance between avoiding a deep crisis now and ensuring long-term sustainability,” he said.

“If we had not been extremely prudent in our borrowing and our policies, those multilateral institutions would not have lent to us at all.

“Fiji’s experience stands up well in the context of the global experience. The International Monetary Fund reports that total global debt rose by an astonishing 28 percent in 2020.

He said the weighted average interest rate of Fiji’s debt portfolio dropped sharply, from 6.2 per cent in 2020 to 4.6 percent in January, this year.

SOURCE: FIJI LIVE/PACNEWS