Official Development Finance to the Pacific increased in 2024 reaching US$4.1 billion, ending three years of decline, but a new report says the rise came predominantly from concessional loans, which offset falling year-on-year grants.
The Pacific aid landscape has stabilised but is increasingly debt-driven, says the Lowy Institute in a new report published today.
The ’Pacific Aid Map 2026’ which tracks aid and development finance flows across the Pacific, notes that Australia remains the largest Pacific Aid partner.
Riley Duke, researcher at the Lowy Institute, said the 2026 version of the interactive map https://pacificaidmap.lowyinstitute.org/ was published today.
“This year we added a currency change tool, so all the data can be viewed in different Pacific currencies, including Tongan paʻanga.”
Tonga-specific numbers from new data:
- Total aid spending in Tonga (grants and loans combined) rose to T$423 million in 2024, up 5% from 2023 and 34% above the average for 2015–2019.
- Tonga's five largest sources of aid in 2024 were Australia (T$161 million, 38% of the total), New Zealand (T$73 million, 17%), the World Bank (T$71 million, 17%), China (T$66 million, 16%) and the Asian Development Bank (T$24 million, 6%).
Pacific
- Total ODF to the Pacific reached US$4.1 billion in 2024, a 10% rise in 2023 that ended three consecutive years of contraction and left support moderately above pre-pandemic (2018–19) levels.
- The increase was driven entirely by lending: concessional loans grew 47% and non-concessional loans more than doubled, taking total lending to US$1.3 billion, double the average annual level seen in 2015–19.
Australia largest Pacific aid partner
Aid to the Pacific is increasingly concentrated among a few major partners, with Australia by far the largest. The United States has cemented a long-term but narrow commitment to the three Compact states.
- Australia disbursed US$1.5 billion in 2024, accounting for 37% of all regional development flows, more than three times the next-largest bilateral partner, with its support spread widely across the region.
- More than 80% of US support flows to the three Compact states (FSM, Marshall Islands, and Palau); excluding these flows, the US ranks only as the ninth-largest partner to the region since 2008.
Australia and multilateral development banks dominate lending to the region.
• Australia has signed US$2.4 billion in new loan agreements since 2021.
• Strategic infrastructure – ports, airports, telecommunications, and power generation – has accounted for more than half of all new infrastructure commitments since 2020, and infrastructure overall has risen from 15% of regional development finance in 2008 to more than a third by 2019.
Chinese loans
The Lowy Institute reported that China maintains aid strategy shift from large-scale lending to high-frequency, small-scale grants. China's Pacific aid remains below its 2010s peak but has stabilised around a high-visibility grant model tied to diplomatic objectives. Loans from its mid-2010s lending boom are now entering acute repayment phases.
- Chinese lending has fallen sharply, from an annual average of US$360 million in new loan commitments during the 2010s to around US$90 million a year since 2020.
- Chinese aid spending totalled US$255 million in 2024, a modest lift on its post-pandemic average of US$225 million, but well below the 2010s average of US$330 million, while grant commitments hit a record high, running at close to twice the pre-pandemic average.
- The legacy of earlier loans now weighs heavily on several countries, with Tonga, Samoa, and Vanuatu facing acute repayment phases; Tonga's position is especially difficult ahead of a 2029 repayment
”Chinese state-owned firms dominate Pacific infrastructure contracts. Chinese state-owned enterprises have become the dominant construction contractors for Pacific infrastructure, including on projects financed by multilateral development banks. This position has held even as Beijing's own direct financing has declined.
“Chinese SOEs have been involved in more than US$5.1 billion of Pacific infrastructure since 2008, around US$3 billion financed directly by China and the rest by the ADB and World Bank, accounting for roughly 40% of Pacific infrastructure projects by value.”
- On ADB projects, Chinese firms won 52% of infrastructure contract value over 2016–25 (102 contracts), or 45% of work by value once locally awarded contracts are excluded.
- On World Bank projects, they won 56% of infrastructure contract value over the same period (33 contracts), reflecting the concentration of larger, higher-value projects among Chinese SOEs while local firms take smaller contracts.
Oil price shock
The Lowy Institute said that the Iran war is the latest in a series of shocks to hit the region, but the scale of the international response is uncertain. Pacific economies have limited capacity to absorb shocks such as the Iran war, leaving them at risk of a "lost decade" of development on top of earlier crises.
- Pacific income per person in 2025 was still 3% below its 2019 level; if the conflict is prolonged, it could remain 2–4% below pre-Covid levels in 2027, sealing in a "lost decade" of development.
- The region is acutely exposed, with oil import costs typically equating to 5–15% of GDP and around 60% of food imported; unlike past shocks such as the GFC and Covid, signs of a large international financing response so far remain limited.
Energy insecurity
Energy insecurity persists despite renewables focus. Pacific Island economies are among the world's most energy insecure. Recent fuel-market volatility has underscored continued dependence on imported fossil fuels despite sustained investment in renewables.
- External energy investment totalled US$2.2 billion over 2015–24 (around 6% of all ODF), 59% of it for renewables; after years of broadly flat spending, recent commitments have jumped to US$699 million, more than two-thirds of it for renewables.
The Lowy Institute is an independent, nonpartisan international policy think tank. The Institute provides high-quality research and distinctive perspectives on the issues and trends shaping Australia’s role in the world. The Pacific Aid Map is now in its ninth year, covering 50,000+ projects and $60 billion in finance since 2008, and it's the most detailed picture available of who's funding what in the region.