Debt in the Pacific: Growing Threats to Economic Sovereignty

The Pacific may have passed the worst of the COVID-19 pandemic, but the debt burden it left behind continues to shape governments’ choices. The World Bank links the region’s financial pressures to slower growth, shrinking fiscal room, climate disasters, heavy reliance on imported fuel and an uncertain global economy.

Joey Tau, coordinator of the Pacific Network on Globalisation, says the problem cannot be separated from the region’s history. Over two decades, domestic and external developments have challenged the economic structures of Pacific island states, he says. The legacy of colonisation and the long portrayal of the islands as “underdeveloped” states facing economic difficulties have also shaped how debt is understood.

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Over the past two decades, both internal and external developments have challenged the economic structures of Pacific Island states.

“It is under these conditions that debt has been something inherited from our colonisers, and we continue to struggle with,” Tau said. Adam Wolfenden, PANG’s deputy coordinator, warned that many countries still have difficulty meeting their debt obligations. Public debt, he said, has “real-world implications” when governments divert funds from essential services to meet repayments.

Wolfenden also cautioned against reducing the debate to “debt-trap diplomacy.” Focusing only on whether particular donors use finance to gain influence, he said, can obscure broader questions about how borrowing supports economic development and how debt obligations affect public spending and sovereignty.

The region’s indicators offer a mixed picture. Average public debt-to-GDP ratios declined by 1.8 percentage points in 2025, and the number of countries classified at high risk of overall debt distress fell from five to three between 2023 and 2025. Yet four countries remain at high risk under a broader debt-vulnerability assessment.

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It is under these conditions that debt has been something inherited from our colonisers, and we continue to struggle with.

Fiji’s public debt stood at about 79% of GDP in 2025, the highest level among the 11 countries covered by the World Bank report. Although that figure remains below its pandemic peak, progress toward stabilizing the debt has stalled. In Solomon Islands, public debt nearly doubled as a share of GDP, rising by about 14 percentage points since 2022 to reach 30% in 2025. High fuel costs continue to pressure government spending and deficits.

The World Bank says debt sustainability will become harder to maintain as some Pacific countries shift from grant-only financing toward a larger share of concessional borrowing.

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Real-world implications