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Caritas Australia CEO critical of long-term loan plans for Pacific Island nations

Pacific aid: Boys fishing in the Solomon Islands. Caritas Australia is concerned about the Australian Government’s plans to offer long-term loans to Pacific nations.

THE head of Church aid agency Caritas Australia says Australia’s strategic pivot towards the Pacific region, including the introduction of long-term loans for new projects, ignores needs and priorities identified by the region’s political and Church leaders.

Caritas Australia chief executive officer Paul O’Callaghan said “climate-change financing and local aid are really what Pacific Islanders are calling for”.

Mr O’Callaghan said a model using concessional, long-term loans had been rejected by previous Australian governments because that model was found to cause a “debt trap” for the most vulnerable countries.

“Ignoring the single biggest item of policy concern for regional leaders and then introducing a model for financing that has been found for 40 years around the world to often lead to the most vulnerable countries getting into a debt trap … is not an ideal approach,” he said.

Mr O’Callaghan has spoken out after Prime Minister Scott Morrison last week announced expanded assistance to the Pacific, that some critics have dismissed as political self-interest to counter the rising influence of China.

There are a range of initiatives to strengthen diplomatic, defence and economic ties, including a $2 billion financing facility to help build major, much-needed projects through long-term loans and grants.

“This is not just our region, or our neighbourhood. It’s our home,” Mr Morrison said.

“It’s where Australia can make the biggest difference in world affairs.”

Paul O’Callaghan

However Mr O’Callaghan, a former Australian High Commissioner to Samoa and deeply engaged in Pacific affairs, said concessional, long-term loans to Pacific nations was a fraught policy move.

“Very vulnerable, poor countries, just like individuals in our own society, sign on to loans and five years later they find themselves in a diabolical situation,” he said.

“Back in the 1980s both sides of politics in Australia came to realise that there were major dangers in using concessional loans in the aid program and that’s why we ended up with a solid bipartisan commitment to not use those loans.

“It’s a bit odd that Australia would now decide that is the model for us, which, by the way, is the Chinese model.”

Mr O’Callaghan said about 65 per cent of China’s financing to Pacific countries consisted of concessional loans.

Caritas Australia recently released the State of the Environment for Oceania 2018 Report, “Waters of life, oceans of mercy”, that contains dozens of first-person accounts and stories relating to the impact of climate change on communities from Papua New Guinea and Kiribati to Tonga, Samoa and the Carteret Islands.

All are calling on the Australian Government to take urgent climate action and provide localised aid.

Small-scale renewable-energy projects on Taveuni Island, Fiji, have provided both clean drinking water and reliable electricity supply through a mix of hydro and solar power.

Mr O’Callaghan said many in the Pacific who Caritas worked with had been disheartened to hear the Prime Minister announce that Australia would not be contributing more to the Green Climate Fund to assist its neighbours to adapt to the unavoidable impacts of climate change.

Read Caritas’ State of the Environment report at

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