China asked to restructure Tonga’s heavy debts as coronavirus hits tourism
- IMF says the risk of debt distress in Tonga is high, as Pacific tourism revenues suffer during the pandemic
- Tonga’s debt repayments are set to increase in 2023-24
Tonga is one of the biggest Chinese debtors in the South Pacific, with its financial reliance dating back to loans taken more than a decade ago to rebuild its capital, Nuku’alofa, after riots.
The small economy, largely dependent on external aid and remittances from Tongans living abroad, has since taken out additional loans.
Tonga is due to make small principal repayments to the Export-Import Bank of China (EXIM) this financial year before the schedule ramps up in 2023-24, when it will need to set aside about 15 per cent of revenue to service external debts.
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“Government is putting in place a strategy to prepare for future payment of these EXIM loans while noting that it has further requested a restructure of both loans,” the government said in a budget statement.
Tonga’s government did not respond to questions. Two sources with knowledge of its financial position said it had asked for the debt to be cancelled, but had yet to receive Beijing’s response.
