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A new report from Australia's Lowy Institute highlights growing concerns about debt related development funding in the Pacific.
The seventh edition of the Pacific Aid Map, released last month, covers official development finance (ODF) from 2008 to 2022 and includes data on more than 37,000 projects.
One key concern mentioned is debt, with growing use of loans rather than grants, that do not need to be paid back.
"Some 60 percent of infrastructure financing in the Pacific is now being financed by loans," the report said.
"While 75 percent of these loans are directed to the region's largest economies, such as PNG and Fiji, the remaining quarter is allocated to smaller economies, a majority of which already face elevated debt risks.
"Loan financing (both concessional and non-concessional) constituted 41 per cent of the total official development finance package in 2022 - the highest share on record."
It found total ODF flows in 2022 remained 19 percent above the pre-pandemic levels of 2019, but ODF to the Pacific experienced its largest annual contraction on record, dropping by 18 percent.
"This was first and foremost the result of Covid-19 support to the region fading."
Australia remains by far the region's largest donor, with total ODF to the Pacific above 2019 levels, but Australian grants have dropped slightly below their pre-pandemic average.
China is back up to the region's second-largest bilateral donor.
"After a pandemic lull, Beijing has narrowly displaced the United States in ODF spending and ramped up its project commitments," the report said.
It also said the outlook for development support in the Pacific is uncertain.
It said on the whole, and despite a three-year pandemic-induced ODF surge, development support in the Pacific has become "increasingly inadequate" and "caught between elevated regional needs, economic fragility, and heightened geopolitical pressures".
"Forecasting of major bilateral donor aid budgets indicates ODA - which includes grants and concessional loans and accounts for around 85 per cent of the Pacific ODF package - will flatline in coming years.
"Pressures on both donor and Pacific government budgets are likely to grow, meaning more will need to be done with less, to secure critical development wins.
"The allocation of development budgets from the region's major donors also appears increasingly shaped by geopolitical concerns, raising questions about the trade-offs and sustainability of the current course."
The report said the pandemic response has driven progress on cross-cutting priorities: "gender equality, climate action, and aid localisation efforts have gained greater attention, but further work is needed".
