5 Jun 2014

Tonga defends use of Chinese loans

10:35 am on 5 June 2014

The Tongan prime minister, Lord Tu'ivakano, believes low-interest loans allow countries such as his to keep economic development happening and he has no problem with them.

Lord Tu'ivakano and John Key.

Lord Tu'ivakano and John Key. Photo: RNZ / Jane Patterson

During his current Pacific tour, Prime Minister John Key has warned Pacific countries that if they cannot pay their debts to other nations New Zealand will not be bailing them out.

Mr Key was responding to questions about the influence of China in the region.

But Lord Tu'ivakano said low-interest loans from China were welcome.

"If we compare them now to the two commercial banks here, they are very high interest - 10 to 15. Nobody in Tonga will loan from the bank because there are other costs affecting them. And I think if China can provide them for us I wouldn't say no."

Mr Key said New Zealand wanted to work constructively with China, but Pacific countries should seek grants not loans.

Speaking from Tonga, Mr key said New Zealand was not concerned about China's presence, and Pacific countries were free to choose who they received money from.