The passing of the Export Finance and Insurance Corporation Amendment (Support for Infrastructure Financing) Bill 2019 in the Senate this evening has paved the way for the Australian Infrastructure Financing Facility for the Pacific (AIFFP) to be established.
“This initiative will fundamentally reshape Australia’s aid program, yet there has been very little public debate or consultation, and parliamentary consideration has been limited,” said Dr Luke Fletcher, Executive Director of Jubilee Australia. “It’s a concessional loans scheme which risks increasing debt in a region that is already suffering from severe debt distress.”
To fund the $2 billion AIFFP, the government revealed in last night’s Budget it will take $500 million from the existing Australian aid budget and combine it with $1.5 billion in loans from EFIC, Australia’s export credit agency. The government has also cut the total level of the Australian aid budget overall, by failing to resume indexation.
“The government has cut the Australian aid budget for the sixth year in a row, bringing it to a new historic low. As a further blow, it’s taking $500 million out of what remains to fund a type of loans scheme which has previously been found to create debt traps for vulnerable countries,” said Paul O’Callaghan, CEO of Caritas Australia. “At the same time they’re decreasing funding for much-needed aid programs in countries like Cambodia and Bangladesh.”
Detailed concerns about the AIFFP are outlined in a report Enter the Dragon: Australia, China, and the New Pacific Development Agendaby Jubilee Australia, Caritas Australia and the University of NSW released last week. The report recommended that no further steps be taken to progress the AIFFP until after the upcoming Federal election, until a more complete and public assessment of infrastructure needs in the Pacific is done, and until a more complete and thorough investigation of the appropriate mechanisms for an infrastructure financing program can be explored.