Pacific aid rebounds, but growth is increasingly debt-driven

Official development finance to the Pacific increased in 2024, ending three years of decline. The rise came predominantly from concessional loans, which offset falling year-on-year grants.

Total official development finance (ODF) to the Pacific Islands region was $4.1 billion in 2024, a 10% rise from 2023. This follows three consecutive years of contracting support after the highs seen during the pandemic, with total ODF stabilising moderately above 2018–19 levels (Figure 1).

The increase in development support in 2024 was driven by an expansion in concessional and non-concessional lending. Concessional loans to the region grew by 47%, while non-concessional loans more than doubled. Total lending to Pacific Island economies cumulatively reached $1.3 billion, double the average annual pre-pandemic levels from 2015–19.

Grant financing, by contrast, fell by 3.5% to $2.8 billion in 2024, though it has held slightly above pre-pandemic levels. This combination of flat grant funding and rising lending is likely to define the region’s financing mix in the coming years, reflecting both constrained donor budgets and expanded access to concessional lending.

Drawing on preliminary budgets, outlook statements, public announcements, and credible third-party estimates, we estimate total ODF fell to $3.8 billion in 2025, a modest reduction given major global aid cuts.^* The Pacific’s stability relative to other regions rests on three pillars: Australia’s sustained engagement, the dominant and stable role of the multilateral development banks, and the renewal of US Compact financing. Together, these factors have held overall ODF close to pre-pandemic levels even as financing has fallen sharply elsewhere.

At the country level, development financing trends continue to diverge between Papua New Guinea, Fiji, and the rest of the region. The Pacific’s two largest economies both took on substantial loans during the pandemic, but their post-crisis financing trajectories have differed. In PNG, total ODF in 2024 was 13% below 2018–19 levels, with grant financing falling to a 15-year low. Lending volumes, however, remain elevated, driven by ongoing Australian and multilateral budget financing programs and a raft of major loan-financed infrastructure projects. Fiji, by contrast, received total ODF volumes more than double those seen before the pandemic. This is a product of the country’s shift towards a more reform-minded government and is driven in large part by increased Australian, New Zealand, and MDB support.

Across the region’s other 12 economies, total ODF has largely held steady over the past half decade (Figure 2). A majority of these countries saw 2024 financing flows 10–20% above pre-pandemic averages. Tuvalu is a notable outlier, recording the largest relative growth in ODF, with financing levels in 2024 nearly triple those of a decade earlier. This increase reflects expanded Australian support linked to the Falepili Union treaty, growth in climate adaptation projects, and a major multi-donor land reclamation initiative.

Among these predominantly grant-receiving economies, Solomon Islands stands out for its reliance on lending in its development finance mix. In 2024, more than one-third of incoming ODF was delivered as loans, driven by increased MDB lending and a temporary spike in Chinese financing linked to the Huawei cell tower project.