Greater grant aid, not loans, needed for Pacific development

Poverty in the Pacific (Image Credit: World Vision Australia).

World Vision Australia welcomes the Australian Labor Party’s commitment to focus Australia’s development efforts on the Pacific, and return the aid portfolio to Cabinet.

World Vision CEO, Claire Rogers, urged parties on all sides of politics to increase grant-based aid funding rather than providing loans to help meet the development needs of the Pacific, following plans announced today by the Labor party to set up a government-backed infrastructure investment bank to provide loans to Pacific countries.

“If Australia wants to be a ‘development partner of choice’ for Pacific countries, then it should boost grant-based funding to the region through the aid program rather than burdening Australia’s neighbours with greater debt through loans.”

“The Pacific countries and communities which need Australian aid the most are those that have the least capacity to absorb greater debt.”

Ms Rogers said that there was definitely a case for providing infrastructure loans in certain contexts for middle income countries with low debt levels, however, that this was not the case for many Pacific island countries which have high levels of debt distress.

Ms Rogers said that maintaining and expanding Australia’s grant-based aid in the Pacific would strengthen Australia’s value proposition as a development partner.

“One of the distinctive characteristics of Australia’s aid program is that it is almost exclusively grant-based. A move towards loan-based development assistance diminishes Australia’s value proposition.”

If an infrastructure investment bank is funded as part of the aid program, then Ms Rogers said it should design loans with the interests of the recipient countries in mind.

“If infrastructure loans are introduced, then they should be designed and allocated according to the recipient country’s ability to absorb new loans and the potential benefit of the proposed infrastructure project for people living in poverty.”

“Infrastructure funded by Australia’s aid program should have an intentional focus on reducing poverty, be climate resilient, build local capacity and be holistic by complementing hard infrastructure like roads, bridges or ports with soft infrastructure like skills and information to ensure they are maintained and deliver their promised benefits.”

“Funding for an infrastructure investment bank should not come at the expense of grant-based funding through the aid program.”