Pacific Islanders have always been travellers. Setting forth in ocean-going canoes, they first spread to new lands and new prosperity more than 5,000 years ago. Today, they are still going. In 2017-2018, before COVID-19, more than 18,000 Islanders travelled to New Zealand or Australia for work.
Pacific Island countries rely on the money wired home. Seven of the top ten recipients of remittances, as measured by share of gross domestic product, are in the Pacific region. Far from being a problem, remittances play a major role in maintaining national debt in the Pacific at a sustainable level. If Pacific Island countries were to negotiate with their key trade partners — Australia, New Zealand, and China — to facilitate the movement of skilled workforce, they could expect skills, income, and increased government revenue.
Globally, we have witnessed a rapid growth of debt over the past three years, due to the need to shore up economies against potential economic and financial crises due to the COVID-19 pandemic. The rate of global debt accumulation during the COVID-19 pandemic was faster than the early phases of the Great Depression and the Global Financial Crisis of 2007/2008. Nearly 60 percent of developing countries, which include Pacific Island countries, are now either in distress or at risk of distress. For example, Papua New Guinea’s gross financing needs (the sum of primary fiscal deficit and maturing debt obligations) between 2021 to 2023 are projected at 13.4 percent of gross domestic product, which is 6.4 percent above the pre-pandemic level. This substantial growth in debt in Pacific Island countries has exposed them to debt problems, which are expected to worsen in the coming years. Currently, none of the Pacific Island countries are in distress but most are high risk. The Pacific Island countries’ average debt-to-gross domestic product ratio has increased from 32.9 percent in 2019 to 42.2 percent in 2021. Fiji, Vanuatu and Palau all recorded debt-to-gross domestic product ratios of above 70 percent in 2021.
