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[Pacific Institute of Public Policy] UNSURE REFUGE – Predatory lending practices are leading some Pacific island countries toward insolvency

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In its latest Discussion Starter, Unsure Refuge, the Pacific Institute of Public Policy (PiPP) investigates the consequences of a rapid increase in concessional lending to Pacific Island governments. With many investment projects failing and some of our countries heading on the path towards debt distress we reflect on whether it is time to reconsider lending practices across the region. The paper explores how the management of public finances is steadily being undermined by a desire to rapidly push through ill-thought-out lending agreements. Development partners create little space for understanding the full consequences of adding to debt burdens or to providing adequate analysis investment projects. Yet, at the same time, the vulnerability of Pacific Island states and their limited ability to meet the increasing demand for public services – including health and education – means we cannot tolerate the same levels of debt or continue to passively commit more revenues towards repayment. It is for this reason that we ask, “are our development partners acting like true friends?” Key messages of Unsure Refuge:

  • The Pacific has witnessed a sudden increase in borrowing to pay for ill-considered infrastructure projects.
  • Much of the lending has been based on flawed analysis – we can’t afford to keep making these mistakes.
  • Our tolerance for debt must be a lot lower – our economies are too small and fragile to continue taking on more loans
  • The rising cost of servicing debts means governments have less money to spend on services such as health and education

The aim of this paper is to stimulate an informed debate on concessional lending and the role it should play in our region. The full document can be downloaded here. For more information, please contact Kiery Manassah, kmanassah@pacificpolicy.org The Pacific Institute of Public Policy is an independent, non-partisan and not-for-profit think tank based in Port Vila, Vanuatu and exists to stimulate and support policy debate in the Pacific.

This entry was posted on Thursday, October 24th, 2013 at 4:56 pm and is filed under Discussion Starters. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

 

Related link: UNSURE REFUGE: Rash, unsound borrowing and predatory lending practices are leading some Pacific island countries toward insolvency

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