The Minister of Public Enterprises was baffled by the previous Hu‘akavameiliku administration’s Cabinet decision to write off portions of loans intended to repay the existing $157 million loan balance owed to China.
Former Prime Minister Hu‘akavameiliku stated earlier this year that the outstanding debt balance stood at TOP157 million (approximately US75 million).
He said the balance resulted from his government’s repayments toward an existing TOP$197.2 million debt. However, he never disclosed that his administration had forgiven parts of local businesses’ loans the previous year.
The government secured the loan from China before allowing the businesses affected by the 2006 riots to borrow to rebuild their businesses. However, it was later discovered that no agreements were confirmed between the government and these businesses on how to pay back their loans.
Piukala, who is currently reviewing the government’s public services, said only one business, Royco, refused the write-off offer.
The Minister claimed Royco would pay its debts in full to help the country.
Kaniva News could not reach the former Prime Minister or these companies for comments.
The payments made under the write-off agreement totaled approximately TOP$12 million, leaving the country with roughly $140 million to settle.
Piukala said the situation was problematic and had differing opinions about the write-off deal.
He supported his viewpoint by mentioning prayers that ask God for a clear conscience and the importance of spiritual discernment “when we feel suspicious”.
Written-off deals
In September 2024, the cabinet decided to write off 25 percent of each company’s loan affected by the riot and were allowed to borrow from Chinese loans, Piukala claimed.
The write-off extends to include the interests.
After the Cabinet decision was approved, City Asset, a company linked to former Prime Minister Lord Sevele, who was instrumental in securing the loan from China, paid off its loan.
The Minister claimed City Assets paid off approximately $6 million, resulting in a $5 million savings through the write-off agreement.
Piukala further alleged that OG Sanft’s debt was reduced by $8 million through the write−off, leaving only $7 million outstanding. Due to this adjustment, the company promptly paid $6 million upfront.
Tungi Arcade has not yet agreed to make any payments, claiming that the building was substandard when it was handed over to them and that leaks were allegedly discovered, according to Piukala.
The loans
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 in January this year 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.
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 later write it off.
As Kaniva News reported in 2017, Lord Sevele and his City Assets business rejected a government demand to sign a contract to ensure he was 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.
