SYDNEY (Reuters) – The Pacific island nation of Tonga has called on Beijing to restructure its large bilateral debt, the government said Thursday, as the pandemic disrupts the region’s tourism revenues and a heavy loan repayment schedule Chinese is looming.
Tonga is one of the biggest Chinese debtors in the South Pacific, their financial dependence dating back to loans taken over a decade ago to rebuild its capital, Nuku’alofa, after the riots.
The small economy, largely dependent on foreign aid and remittances from Tongans living abroad, has since taken out additional borrowing.
Tonga is expected to make small principal repayments to the Export and Import Bank of China (EXIM) this fiscal year before the schedule accelerates into 2023-2024, when it will need to set aside around 15% of its revenues to service the external debt.
“The government is putting in place a strategy to prepare for the future payment of these EXIM loans while noting that it has further requested a restructuring of the two loans,” the government said in a budget statement.
The government of Tonga did not respond to questions. Two sources with knowledge of her financial situation told Reuters she had requested debt cancellation, but had yet to receive a response from Beijing.
The Foreign Ministry in Beijing did not immediately respond to a request for comment.
Tonga has already obtained a stay on the principal repayment schedule, although the debt has remained unpaid. Its total external debt stands at $ 186 million, nearly two-thirds of which is owed to China, according to the budget statement.
The United States and its Western allies fear that China will use the debt to gain leverage over strategically located Pacific islands, China repeatedly claims.
In February, the International Monetary Fund said that despite recent prudent management, Tonga’s risk of external debt distress was high due to past borrowing.
With no confirmed coronavirus infections, Tonga has relaxed internal controls, although global travel restrictions have devastated the tourism industry in the Pacific.
“Most of the money currently entering Tonga is through remittance,” said Simana Kami, owner of the Oholei Beach Resort, adding that most of her guests have arrived on cruise ships or via flights. international.
“Those without parents who earn income abroad suffer,” he told Reuters by phone. “We are open, but not at breakeven point. It’s sad, we are an empty paradise.
Reporting by Jonathan Barrett; Editing by Clarence Fernandez