For Tonga, the numbers are stark. Aid accounts for about 35 per cent of GDP, one of the highest ratios in the world. Between 2008 and 2023, Tonga received roughly US$140 million a year in development finance. The share of loans has dropped from 23 per cent a decade ago to under 3 per cent today, following IMF warnings about debt stress linked to China’s reconstruction loans after the 2006 Nuku‘alofa riots.
Prime Minister and Finance Minister Hon. Aisake Eke says that dependence must end. Under the Government’s 2025/26 Budget Strategy, Tonga will raise funds through government bonds, provide low-interest loans to local businesses, and create a capital market to attract investment from Tongans at home and abroad.
“The China loan will be fully repaid by 2029/30,” Eke said. “Once that burden is gone, around TOP 30 million a year can go to new priorities. We want to build our own strength by helping local businesses grow, cutting borrowing costs, and lifting productivity.”
Eke’s plan aims to replace dependency with self-sustaining growth. But the Lowy Institute’s findings show the challenge ahead: aid still underpins a third of Tonga’s economy, and the region’s biggest donors are increasingly focused on strategic competition rather than long-term development.
As Australia steadies support, China adjusts its playbook, and Tonga pushes for self-reliance, the next decade will show whether the Pacific can turn foreign aid into genuine independence.
