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China delays Tonga loan payments as Pacific nation signs up for Belt and Road

China delays Tonga loan payments as Pacific nation signs up for Belt and Road

By Charlotte Greenfield

PORT MORESBY (Reuters) – Tonga has joined China’s Belt and Road Initiative and received a reprieve from Beijing on the timing of debt payments shortly before the start of a onerous loan repayment programme.

Lopeti Senituli, political adviser to Tongan Prime Minister ‘Akilisi Pōhiva, told Reuters by email on Sunday 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 South Pacific island nations with significant debts to China. The postponement came just as Tonga was set to begin repaying its debt principal, which is expected to put a severe strain on its finances.

China’s foreign ministry did not immediately respond to a request for comment on Sunday.

Tonga’s financial dependence on China dates back just over a decade after deadly riots in Tonga’s capital, Nuku’alofa, destroyed much of the small Pacific nation’s central business and government districts.

The government rebuilt the city with Chinese funding, and the roughly $65 million in initial Chinese loans for the island now exceeds $115 million due to interest and additional loans. This represents almost a third of Tonga’s annual gross domestic product, budget documents show

The issue of China’s debt was at the forefront of the Asia Pacific Economic Cooperation summit held in Papua New Guinea (PNG). On Saturday, US Vice President Mike Pence criticized President Xi Jinping’s flagship program, saying countries should not take on debt that compromises their sovereignty.

Although most Pacific island nations are not members of APEC, their representatives have been invited to attend events and have been involved in discussions with larger regional neighbors such as China and Australia.

China’s official Belt and Road website reported last week that Fiji had made a commitment to the Belt and Road, joining the likes of Samoa and PNG.

(Reporting by Charlotte Greenfield in PORT MORESBY; Additional reporting by Ben Blanchard in BEIJING; Writing by Jonathan Barrett; Editing by Sam Holmes)