Tonga has signed up to China’s Belt and Road Initiative and has received a reprieve from Beijing on the timing of debt payments shortly before an onerous schedule to repay loans was due to start.
Lopeti Senituli, political advisor to Tongan Prime Minister ‘Akilisi Pohiva, yesterday told reporters by e-mail that Tonga had signed a Belt and Road memorandum of understanding and that the concessional loan had been deferred for five years.
Tonga is one of eight island nations in the South Pacific that owe significant debt to China. The deferment came just as Tonga was set to commence principal repayments on the debt, which is expected to put severe strain on its finances.
The Chinese Ministry of Foreign Affairs did not immediately respond to request for comment.
Tonga’s financial reliance on China dates back just more than a decade after deadly riots in the capital of Tonga, Nuku’alofa, destroyed much of the small Pacific nation’s central business and government districts.
The government rebuilt the city with Chinese financing, and China’s loans to the island, which were initially about US$65 million, now exceed US$115 million, due to interest and additional borrowings. That represents almost one-third of Tonga’s annual GDP, budget papers show.
The issue of Chinese-issued debt has been at the forefront of the APEC summit, held in Papua New Guinea.
While most Pacific island nations are not APEC members, their representatives were invited to attend events and have been engaged in talks with larger regional neighbors, such as China and Australia.
China’s official Belt and Road Web site last week reported that Fiji had made a commitment to the Belt and Road, joining the likes of Samoa and Papua New Guinea.
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