2025 Pacific Aid Map: Australia holds the line as major aid donors retreat from Pacific

Australia’s dominance as the largest donor to Pacific Island countries is set to grow as the Pacific faces deepening aid cuts by other Western partners, including the United States, New Zealand and much of Europe, the 2025 edition of the Lowy Institute’s Pacific Aid Map reveals.

Covering the period from 2008 to 2023, this year’s Pacific Aid Map shows that total official development finance (ODF) to the Pacific fell by 16 per cent in 2023 to US$3.6 billion, marking a second consecutive year of record declines in development support.

Australia remains the region’s leading donor, providing 43 per cent of all ODF to Pacific countries, more than four times the contribution of New Zealand, the next largest donor. The report projects a flat outlook for ODF flows to the Pacific through to 2028, propped up by increased Australian infrastructure lending that will largely offset cuts by other donors.

The report argues that the United States’ aid cuts have been overstated in dollar terms but have deepened perceptions of American unreliability, while also playing into Chinese diplomatic narratives.

China, meanwhile, has recalibrated its Pacific aid strategy, shifting away from loan-financed infrastructure projects towards grants and smaller, community-based initiatives. This shift has allowed Beijing to strengthen political and grassroots ties even as its total spending remains flat.

The eighth edition of the Pacific Aid Map includes data on more than 38,000 projects by 76 development partners, totally US$55 billion, across 14 states: Cook Islands, Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

On Australia and China, Pacific Aid Map lead author Riley Duke said:

“Australia’s steady aid spending and rapid expansion in infrastructure lending looks set to cushion the Pacific from the impact of major donor cuts.”

“Australia’s dominant role in Pacific development is expanding. By 2028, it will likely deliver more than double the combined support of Japan, New Zealand, the United States, France, Germany, and the United Kingdom.”

“China has rapidly adjusted its aid strategy in the Pacific. After a collapse in lending, its spending has stabilised, moving away from debt-financed infrastructure towards a larger portfolio of grant-funded and grassroots projects.”

“China now spends less than it did a decade ago, but its aid reaches far deeper into Pacific communities. Projects are smaller but more frequent and locally targeted.”

“Chinese embassies in the Pacific have rapidly operationalised President Xi’s call for more ‘small and beautiful’ aid cooperation.”

On the United States, Pacific Aid Map project lead Alexandre Dayant said:

“In the Pacific, the real cost of US aid cuts won’t be measured in lost dollars, but in lost trust.”

“While Washington steps back, Beijing is winning something far more strategic: narrative dominance.”

“China is recasting itself as the steady, non-interventionist partner in a region where consistency counts.”

“For Australia, America’s withdrawal is more than inconvenient — it leaves Canberra increasingly alone in countering Chinese influence.”

KEY FINDINGS

• Pacific Islands aid falls to pre-pandemic levels amid steep lending contraction. After two years of record contraction, Pacific ODF volumes have returned to pre-pandemic levels. The decline has been driven by a sharp fall in lending to PNG and Fiji, while grant support has remained stable across the rest of the region.
  
• Australia holds the line despite aid retreat by Western donors. Sharp aid cuts by major Western donors have thrown the global development landscape into disarray. Australia’s dominant role in the Pacific Islands is likely to insulate the region from the worst impacts, resulting in a flat but fragile development financing outlook.
  
• Impact of USAID cuts overstated but compounds US reputational freefall. USAID cuts are unlikely to materially affect Pacific Island aid levels, given most US support flows through protected Compacts of Free Association. However, even modest cuts amplify uncertainty and reputational risks, reinforcing perceptions of US inconsistency.
  
• China’s aid model grows more sophisticated with record grants and grassroots projects. After a prolonged decline in lending, China’s development engagement in the Pacific Islands region has stabilised and recalibrated. Funding remains below 2010s levels, but the focus has shifted from debt-driven infrastructure to more targeted, grant-based and grassroots engagement.
  
• Strategic infrastructure spending booms as health and education support slides. Infrastructure has emerged as the Pacific Islands’ dominant development finance theme, driven by acute needs and intensifying geopolitical competition. Yet despite record flows, investment has only marginally narrowed the region’s infrastructure gap and has come at the expense of human development sectors.

ABOUT THE PACIFIC AID MAP
The annual Pacific Aid Map — first launched by the Lowy Institute in 2018 — is a comprehensive database tracking official development finance flows in the Pacific Islands region. By promoting greater transparency of ODF flows, the Lowy Institute seeks to increase coordination, improve accountability, and strengthen decision-making and policy debate on aid, development, and geoeconomic competition in the region.

MEDIA CONTACT
Andrew Griffits
Head of Media and Communications
media@lowyinstitute.org