Pacific countries are at risk of a “lost decade” after the Covid pandemic, and the region faces its biggest economic contraction in four decades, according to a new report on foreign aid.
The Lowy Institute’s latest Pacific Aid Map, which sets out aid expenditures and donations to the Pacific Islands region, shows that $ 2.44 billion in foreign aid came to the Pacific in 2019, representing approximately 8% of the region’s GDP.
Australian aid to the region has increased, following growing fears that China’s “soft diplomacy” through concessional loans for infrastructure projects was diminishing Australia’s influence in the region. While Australia’s total foreign aid budget has shrunk under the Coalition, the Pacific has been the center of what remains, with Australia “restructuring” its budget to increase its contributions to its Pacific neighbors.
But China, an emerging force in the region, cut its contributions that same year, cutting its aid budget from $ 246 million in 2018 by 31%, handing out $ 169 million in 2019.
Lowy reports that that is the lowest level of aid China has provided to the Pacific region since 2012, and the drop came even as Beijing secured new diplomatic alliances. China’s financing to the region is most commonly provided in the form of concessional loans, leaving countries in debt to the government. In 2019, 67% of Chinese aid was in the form of loans, up from 41% the previous year.
Initial analysis for 2020 shows no indication that China has increased its financial support, leaving the region’s governments with financial gaps that it has little hope of filling.
The Lowy Institute analysis, to be released on Wednesday, estimates an additional $ 3.5 billion will be needed for the region to recover from the pandemic, but donors appear to be in short supply.
In total, aid to the Pacific was reduced by 15% in 2019, and health spending accounted for just 11% of the US $ 2.44 billion.
Lowy reports that Australia accounted for 42% of all aid to the Pacific region between 2009 and 2019, but in more recent years, the amount of money spent on health has been reduced in favor of infrastructure projects.
As part of your pandemic response, Australia established a temporary Covid package of A $ 305 million within the Pacific Step-Up program, which aimed to “help address the economic and social costs of the pandemic in the Pacific and Timor-Leste, helping to underpin the stability and economic recovery of our region.”
The package was designed primarily to help Pacific governments maintain essential services, including aviation, during the worst of the pandemic. Vaccines have also been sent to Pacific Island governments, along with teams of specialists, to help curb the spread of Covid.
But with the world beginning to move forward, the Lowy Institute notes that more needs to be done to ensure that the nations of the Pacific region are not left further behind.
Australia is also facing pressure from its Pacific neighbors to act on climate, with warnings that the Coalition’s “inertia” on the issue was undermining its position within the Indo-Pacific, while struggling to reassure Australia. partners that Aukus’ new strategic pact would not. increase defense tensions in the region.
George is Digismak’s reported cum editor with 13 years of experience in Journalism