Tonga’s Repayment Of $64.5 Million Loan To China Deferred

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Tonga’s Repayment Of $64.5 Million Loan To China Deferred Final decision on loan grace period yet to be announced

By Pesi Fonua

NUKUALOFA, Tonga (Matangi Tonga, Sept. 18, 2013) – China has deferred Tonga's repayment of its $119 million pa'anga loan [US$64.5 million] indefinitely, the Prime Minister Lord Tu'ivakano told the Tongan parliament this morning, 18 September.

Tonga was scheduled to start repaying its loan from the Exim Bank of China, this coming Saturday, 21 September.

Lord Tu'ivakano who had recently been to China, said that there had been negotiation with Chinese officials to extend the loan grace period from five years to 10 years.

Chinese officials had insisted for the grace period remain at five years, though they told the PM and his delegation in China that they would write and inform them of their final decision.

The first repayment of the interest amounts to TOP$11 million [US$5.9 million], but with interest plus principal, the amount due is TOP$13 million [US$7 million].

Repayment deferred

Lord Tu'ivakano said that this morning they received a letter from China informing them that the date for the repayment of the loan had been deferred. The Chinese officials had not made a final decision on Tonga's extension request, but they would let them know at a later date.

The Prime Minister went on to stress that companies which borrowed from government for the reconstruction of their premises would have to repay their loans from government, disregarding how long the Chinese would extend the grace period for government to repay its loan.

The loan policy for the reconstruction of the Nuku'alofa Central Business District (CBD) was for government to borrow from the Exim Bank of China, at a very low interest rate and then relend it to business whose properties were destroyed, by offering a slightly higher interest rate.

No loans agreements

However, the Prime Minister admitted that though construction was completed in early 2012 and the loan money had been spent, but none of these businesses had signed a loan agreement with government.

The discussion over the Chinese loan became very tense when Lord Nuku questioned what happens to people whose properties were destroyed but they had not been rebuilt, though government and the tax payers were about to repay the loan.

He queried why were not the people who were responsible for destroying the Nuku'alofa CBD asked repay the loan.

The Deputy Prime Minister, Hon Samiu Vaipulu told the House that a few people were imprisoned for their involvement in the destroying of Nuku'alofa, but for the others, "we will leave it to god."

Hon. Clive Edwards, the Minister of Justice and one of the members of parliament who was charged with sedition, relating to the destruction of Nuku'alofa, told the House that the court had set some of these people free because it was for a political purpose, it was national issue and not for individual gain. He said that even though people suffered because their businesses were destroyed and would continue to suffer, but it was for political change. He believed that government should look at how to help these people.

The Chinese loan issue was raised by 'Akilisi Pohiva, one of the members of parliament who was also charged with sedition, relating to the destruction of Nuku'alofa.

He raised the loan issue because he said he heard that China was about to build a government building complex at Pangai Si'i and he wanted to know if it was another loan from China, on top of the loan that Tonga was still trying to figure out how to repay.

Hon. Samiu told the House that the rebuilding of government offices complex at Pangai Si'i was not a loan. He also reminded the House that only government loans of more than TOP$15 million [US$8.1 million] must be approved by parliament.

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