Tonga’s loan from China could have been now paid off if the funds borrowed had been exclusively secured to repair the damages from the 2006 riot.
Former Prime Minister Hon Hu’akavameiliku said last week that the outstanding balance was TOP$157 million, equivalent to US$75 million.
He said the current debt balance resulted from payments made by his government towards the previous outstanding amount of TOP$197.2 million.
A Parliamentary Select Committee led by Dr Sitiveni Halapua and former Prime Minister ‘Akilisi Pohiva said in its 2012 investigative report that the original loan was TOP$119 million.
The latest figure provided by Hon Hu’akavameiliku last week exceeded the $119 million by about TOP$78. The difference appeared to show that most loan repayments made to date have been allocated towards interest and accrued fees.
A recent report by the ABC claimed the loan is set to be paid off by 2030.
This means it would take Tonga six more years to pay it off, an equivalent of about $26 million a year, excluding any additional accrued fees and interest.
Dr Halapua said in an interview with this reporter that the loan, if managed appropriately and only secured to rebuild the damages caused by the riots, could have been only TOP$30 million to $40 million in total.
Investigation report
The report by Halapua and Pōhiva stated that $45.6 million should not have been included in the loan, as those funds were allocated to building projects that were not damaged during the 2006 riots.
It was referring to the $31.9 million Vuna Wharf Project and the $13.7 million Royal Palace Extension Project. The document argued that these projects were illegally included.
The report indicated that approximately 58 percent of the $119 million loan was spent and reallocated in violation of the terms outlined in the initial loan agreement.
The report argued that the loan failed to meet three legal requirements, which were stipulated under the Public Finance Management Act 2002 as follows:
- The $TOP119 million loan far exceeded the $15 million limit, the parliament should have approved the loan by Resolution.
- The loan amount, once approved by Parliament, must be used only for the purpose proposed by government and approved by the Legislative Assembly.
- Once a loan had been approved by the Legislative Assembly, the loan amount must be treated as public money and as a statutory expenditure. It must be paid into an account agreed to by the government and the lender. This subjects the loan funds to the Public Finance Management Act, allowing its expenditure to be protected by the checks and balances of the public accounting system provided by the act.
Recommendations
The report made four recommendations:
- The Parliament must conduct an urgent survey to ensure buildings and structures are earthquake-resistant.
- To see if there were possible illegal activities associated with the spending of the TOP$119 loan.
- To consider further investigation to find out the whereabouts of $23.5 million that was supposed to have been spent locally, and the reason for the transference of USD$ 22.8 million.
Unwise decision
The then Prime Minister Lord Sevele ‘O Vailahi had been accused of imprudently securing the TOP$119 loan, which far exceeded the intended purpose, and using a large amount of it for projects unaffected by the riots.
He reportedly said during an interview with TBC that he had made the decision after he thought China would write it off.
As Kaniva News reported in 2017, Lord Sevele and his City Assets business rejected a demand from the government to sign a contract to make sure he is obliged to pay back the money he borrowed to rebuild his business after the 2006 riot.
The then Prime Minister ‘Akilisi Pohiva told Parliament five companies, including Lord Sevele’s, borrowed a total of TOP$42 million from money the government borrowed from China.
The Pohiva and Halapua report revealed that Lord Sevele’s City Assets business, formerly Molisi Tonga Ltd, was allowed to borrow money from the Chinese loan without Parliament’s approval.
