Australia has emerged as the largest contributor of development finance to the Pacific Islands, accounting for approximately 40 percent of the total from 2008 to 2021. This finding comes from a recent survey conducted by the Lowy Institute Pacific Aid Map, which reveals that the Pacific Islands rely heavily on aid, more so than any other region, due to increasing geopolitical competition. Over the course of 13 years, the Pacific Islands received over $40 billion in development assistance, with development finance serving as a crucial component of their economies.
Australia’s contribution to the islands’ development finance amounted to $17 billion during the specified period, securing its position as the leading donor country. China follows as the second-largest donor, providing approximately $3.9 billion. Notably, direct budget support to governments in the Pacific Island countries experienced a significant surge in 2021, comprising 40 percent of all development finance.
In terms of noteworthy transactions recorded by the Pacific Aid Map in 2021, Australia’s loan of $466 million Australian dollars ($297 million) to Papua New Guinea stands out. This demonstrates the substantial financial assistance provided by Australia to its neighboring nations. Alexandre Dayant, Deputy Director of the Lowy Institute’s Indo-Pacific Development Centre, acknowledged the challenges faced by Pacific Island countries in realizing traditional development pathways. These countries possess small, remote, and internally scattered populations. Furthermore, their economies heavily depend on various sources such as tourism, fishing licenses, commodity exports, and overseas labor mobility. Climate change, particularly the risks associated with rising sea levels and extreme weather events, poses a significant threat to their livelihoods.
The released report highlights that approximately 39 percent of aid pledged to the region in 2021 was linked to climate change. However, the report also emphasizes that climate financing remains insufficient to address the escalating needs. The COVID-19 pandemic prompted noteworthy increases in development support from Australia and Japan in 2021. Conversely, China reevaluated its approach by directing a downsized, more politically targeted aid amounting to $241 million towards recently formed relationships. Chinese projects in the region experienced a significant decrease from $40 million to approximately $5 million between 2013 and 2019.