Nauru, the world's smallest republic, is likely to go bankrupt this week.
It has confirmed that recievers have taken control of its assets in Australia.
Nauru's president, Rene Harris, has flown to Australia and is expected to meet the Foreign Minister Alexander Downer to discuss the financial problems today.
Over the past two-and-a-half years Australia has paid Nauru millions of dollars in aid for allowing it to use the island to detain asylum seekers wanting access to Australia.
Last month, Mr Downer said Australia would provide Nauru with 16-point-five million US dollars to help stabilise the country's economy and strengthen law and order.
The finance company, General Electric Capital Corporation, has given Nauru until the fifth of May to pay a debt of more than 200 million dollars