Four years after the horizon turned black and the earth shook from one of the most violent volcanic events in modern history, the Kingdom of Tonga remains a land of stark contrasts. In the capital of Nuku’alofa, the skyline has largely returned to normal, but on the fringes of the main island and across the outer archipelago, the ghosts of the 2022 disaster are still visible in the form of scattered debris and dormant ATMs.
While the physical ash has long since washed away, a different kind of burden now weighs on the nation’s recovery. For the Tongan government, the struggle to finalize infrastructure repairs is no longer just a matter of logistics or climate resilience; it is a matter of solvency. Today, Tonga’s debt to China hinders rebuild efforts, as a significant portion of the national budget is diverted away from public services to service a decades-old loan.
The eruption of Hunga Tonga-Hunga Ha’apai on January 15, 2022, sent shockwaves across the globe, with the blast heard as far as Alaska. Locally, the impact was catastrophic. A powerful tsunami tore through the coastlines, killing three people and obliterating hundreds of homes and businesses. Six inches of volcanic ash blanketed the islands, contaminating water supplies and paralyzing the economy.
Prime Minister Lord Fakafanua has recently stated that the majority of government-led reconstruction programs are complete. However, he acknowledged that “some leftovers” remain—critical gaps in infrastructure that the state is currently unable to fill without further borrowing, a path the administration is now desperate to avoid.
The financial weight of the Exim Bank loan
The primary obstacle to a full recovery is a mounting debt owed to China’s Exim Bank. The loan was not taken out for the volcano recovery, but for an earlier crisis: the reconstruction of Nuku’alofa’s central business district following the 2006 riots. Originally contracted in 2008 for $55 million (NZ$96.6m), the debt ballooned due to interest, exceeding $100 million (NZ$175.65m) by 2024.
Current budget documents reveal a remaining balance of $67.36 million (NZ$118.3m). To meet its commitment to clear the debt by 2030, Tonga paid China $17.7 million (NZ$31m) in the year ending June 2025, part of a broader total debt repayment of $29.4 million. To put this in perspective, the nation’s entire annual infrastructure budget for the same period was just $10.1 million (NZ$17.7m).
The ripple effects of these repayments are felt most acutely in the public sector. On the island of ‘Eua, for instance, banking services and ATMs remain offline, forcing tourists and residents to carry cash from the capital. Along the west coast of Tongatapu, the wreckage of homes and businesses continues to litter the beaches, a silent testament to a recovery that has stalled.
Trade-offs in public health and safety
The tension between debt obligations and human needs is most evident in Tonga’s health sector. The country faces high rates of non-communicable diseases, including diabetes and obesity, yet the health budget is under pressure. While the budget for the previous year was $24.9 million (NZ$43.7m), this figure was artificially inflated by one-off grants from Australia and New Zealand to rebuild hospitals.
With those donor funds expiring, the health budget is expected to drop significantly. When asked if the debt to China was actively harming the nation’s ability to provide healthcare and infrastructure, Lord Fakafanua admitted, “We could use that money for other things.” However, he maintained that the government intends to honor its signed agreements.
| Expenditure Category | Amount (USD) | Context |
|---|---|---|
| Payment to China (Exim Bank) | $17.7 Million | Annual debt service installment |
| Infrastructure Budget | $10.1 Million | Total annual allocation for works |
| Health Budget | $24.9 Million | Includes temporary donor funding |
Geopolitical pressures and the shift to grants
Tonga’s fiscal struggle unfolds against a backdrop of intense geopolitical competition in the Pacific. China continues to seek expanded influence through infrastructure loans, a strategy that has left several Pacific Island nations in precarious financial positions. The International Monetary Fund (IMF) has categorized Tonga as being at high risk of debt distress, citing concerns over exchange rate volatility and refinancing risks.
Despite this, diplomatic ties remain cordial. During a visit to Beijing in November 2025, King Tupou VI met with President Xi Jinping, who expressed China’s readiness to assist in Tonga’s social and economic development while emphasizing the safeguarding of Tongan sovereignty.
In response to these pressures, the Tongan government has adopted a policy of strict fiscal restraint. Lord Fakafanua has explicitly stated that the country will not accept further Chinese loans, noting that the government is now being “a lot more clever” with its financial management to avoid further entrapment.
The Fanga’uta Lagoon Bridge: A new model
To bypass the risks of debt, Tonga is increasingly relying on grants from the World Bank and the Asian Development Bank. The most prominent example is the Fanga’uta Lagoon Bridge project, a $97 million (NZ$170.4m) initiative and the largest infrastructure project in the nation’s history.
The 720-meter bridge, constructed by the New Zealand firm McConnell Dowell, will connect Nuku’alofa to the southern side of Tongatapu. Beyond its economic utility, the bridge serves a critical safety function: it provides a new evacuation route for the capital in the event of future tsunamis or cyclones, addressing the very vulnerabilities exposed by the 2022 eruption.
New Zealand Prime Minister Christopher Luxon, who visited the site in March, expressed support for Tonga’s shift toward fiscal restraint, reaffirming that New Zealand remains ready to provide assistance as the nation navigates its recovery.
Disclaimer: This article discusses national debt and fiscal policy; it is provided for informational purposes and does not constitute financial advice.
The path toward 2030 remains steep for Tonga. While the Fanga’uta Lagoon Bridge offers a blueprint for growth through grants rather than loans, the immediate priority remains the balancing act of servicing old debts while ensuring the health and safety of a population still recovering from nature’s fury. The next critical checkpoint will be the release of the upcoming annual budget, which will reveal if the government can maintain its “no-loan” pledge while funding essential healthcare.
Do you think international grants are a sustainable alternative to development loans for Pacific nations? Share your thoughts in the comments below.
