Morrison’s promised Pacific bank slammed by Fierravanti-Wells

Former minister for the ­Pacific Concetta Fierravanti-Wells has lashed Scott Morrison’s $2 billion Pacific ­infrastructure bank.

‘Why are we even contemplating saddling our neighbours with even more debt?’ … Liberal former minister for the Pacific Concetta Fierravanti-Wells.

Former minister for the ­Pacific region Concetta Fierravanti-Wells has lashed Scott Morrison’s promised $2 billion Pacific ­infrastructure bank, saying it could plunge already struggling regional neighbours further into debt.

Senator Fierravanti-Wells, a strong critic of Chinese “debt-trap diplomacy” in the region, said that adding to the indebtedness of ­Pacific countries would undermine their ability to fund critical priorities such as health and ­education.

“Let’s be clear. A loan is a loan. It needs to be repaid, usually with interest,” Senator Fierravanti-Wells told The Australian.

“Given that the debt in the ­Pacific is already about $5.5bn, ­including about $2bn to the Asian Development Bank and World Bank, and $1.5bn to Beijing, why are we even contemplating saddling our neighbours with even more debt?”

Senator Fierravanti-Wells said lending another $2bn to ­Pacific countries, which had external debt-to-GDP ratios ­ranging from 25 per cent to 90 per cent, could significantly harm their economies.

“This means scarce government resources must be deviated into debt repayment and away from critical spending such as health and education,” she said.

Senator Fierravanti-Wells was slapped down by former foreign minister Julie Bishop in January after she accused China of ­lending funds to Pacific nations on unfavourable terms and ­constructing “useless buildings” and “roads to nowhere” in the ­region.

She claimed recently to have been vindicated amid increasingly aggressive lending by China in the region, and growing concerns among Australian foreign affairs and security officials over ­Beijing’s motives.

Lowy Institute Pacific program director Jonathan Pryke said Senator Fierravanti-Wells was not alone in her concerns about the impact of the $2b infrastructure bank.

“It’s a really valid concern and one I know the bureaucracy is concerned about,” Mr Pryke said.

“We will need to be creative in how we structure these loans to ensure we do not contribute further to the debt burdens for these countries.”

He said most countries in the region, apart from Papua New Guinea and Fiji, were already ­approaching levels of debt ­distress.

“A lot of these economies are so small one loan can take them right up to their debt threshold,” Mr Pryke said.

The Australian revealed this month that the new Pacific ­infrastructure bank would be run out of the Department of Foreign Affairs and Trade, despite concerns it lacked the skills, ­remuneration structure and prudential systems to become a major development lender.

Australia, Japan, the US and other Western powers have led a joint campaign pushing back against Xi Jinping’s efforts to pour cash into developing South Pacific nations. Over the past year, a bidding war has erupted between China and the West over funding for critical infrastructure assets.