International funding and financing for the Pacific Islands has not been too heavily impacted amid U.S. Aid cuts, according to a new report.
As competition among the major powers for influence in the key region remains intense, the Lowy Institute’s ninth annual Pacific Aid Map report shows Australia was by far the leading provider of grants and loans to the region in 2024.
Australia disbursed US$1.5 billion of aid in the Pacific, more than three times that of the next-biggest contributing nation New Zealand and accounting for 37 percent of all development finance.
The report, labelled “the most comprehensive account ever created,” tracks more than 50,000 projects worth US$60 billion in official development finance over the sprawling Pacific Islands region.
It showed total funding for the Pacific was expected to fall from $US4.1 billion in 2024 to $US3.8 billion in 2025.
That means a return to pre-pandemic levels, which the institute said is “a modest reduction given major global aid cuts.”
International aid has slumped after US President Donald Trump shut down the world’s largest funding agency for humanitarian and development aid in 2025.
Western nations, including the UK, France, Germany and Canada, also cut aid around the same time, leaving much of the developing world without previous sources of funding.
The Pacific region is now locked in a contest between the Chinese Communist Party (CCP) and the United States, with Washington’s ally Australia actively exerting its “soft power” influence amid Beijing’s increasing overtures to seek diplomatic recognition.
The report shows that in 2024, Chinese grant commitments reached a record high to almost double their pre-pandemic average, with funding pumped into Pacific education and health infrastructure.
Still, new loan commitments from Beijing have plunged from an average of US$360 million a year during the 2010s to around US$90 million annually this decade, amid increasing concern from Western critics that China has been practicing “debt-trap diplomacy.”
“A decade ago, China was the region’s dominant bilateral lender and infrastructure funder. Australia now holds that position,” the report’s lead author Riley Duke said.
Steady support from Australia, multilateral development banks and renewed U.S. funding have led to the better position for the region, according to the institute’s research.
“As other donors retreat and repeated economic shocks hit the region, Australia’s large and sustained support has been a stabilising factor for Pacific economies,” Duke said.
While the numbers appear positive, the report highlights the threat of a lost decade of development due to the limited capacity to absorb global shocks without outside support.
The institute found average incomes have stalled across the Pacific for nearly a decade.
The Australian Council for International Development said Australian leadership in the Pacific remained critical but should extend to growing global humanitarian needs.
The council’s CEO Matthew Maury said aid shouldn’t be viewed only through a strategic or geopolitical lens.
“Effective development cooperation is about reducing poverty, strengthening resilience and supporting locally led development so communities are better able to withstand future crises,” Maury told AAP.
Maury said Australia’s choices matter even more as many traditional donors reduce their aid budgets.
By Noah Secomb in Canberra.
