How Borrowing Supports the Cook Islands Growth

I tēia ʻatiʻanga nei te mou nei te Kavamani Kūki ʻAirani i tētaʻi au kaioʻu. Karē tēia i te mea mātaukoreʻia me mou tētaʻi au Ipukarea i tētaʻi kaioʻu, e ko te rāvenga tēia e rauka ai te moni nō te ʻakapūʻapinga ki roto i tētaʻi au ʻakakoroʻanga Ipukarea. Kua ʻāite tēia i tāʻau kā rave mē ʻoko ʻare koe nā roto i te tāraʻuʻanga moni ki te pāngika. Mē ka ʻakaputu moni koe nō te ʻoko peke i tōʻou ʻare, ka roa te tuatau e tupu ei te reira – te kitea nei tēia ki roto i tā mātou au ʻakapūʻapingaʻanga – nā roto i te raveʻanga i te au tāraʻuʻanga moni kia rauka ʻia mātou i te ʻakapūʻapinga ki roto i te au ʻakakoroʻanga tei ʻakakoroʻia, kāre i reira e tiaki nō tētaʻi roaʻanga tuatau i te ʻakatupu i te reira. Nā roto i tēia ka rauka ʻia tātou i te tāʻangaʻanga i te ʻapinga ʻangaʻanga i tēia ʻatinga mate tūtaki i te reira i tēia au tuātau ki mua.

Currently the Cook Islands Government holds some debt. This is not unusual for countries to hold debt, and it is a way for countries to gain access to money to invest in things. This is similar to what you do when you buy a house with a mortgage. If you had to save up and buy a house outright with savings, it would take a long long long time - z the same thing is seen with some of our investments – taking loans has allowed us to invest for the current times, rather than waiting into the far future to undertake a project. That way we get to use the asset now and pay it off over time.

E tūkēkē te au tū tāraʻuʻanga moni tā te Kūki ʻAirani i rave, e tē vai nei tētaʻi au ʻākaraʻanga mānea tā tēia au moni tārau i rave ki tō tātou ipukarea. Tēia tētai ʻākaraʻanga, koia ko te moni tei tāraʻuʻia i te tuātau maki Kōviti. Kua tāʻangaʻangaʻia tēia moni no te au porokarāmu tūtaki i te aronga ʻangaʻanga o te ipukarea. Kua tauturu katoa i te ipukarea i te tuātau i tōpiriʻia ai tō tātou kena ipukarea e te tuātau i tūkaui ei te pūʻapinga ipukarea.

The Cook Islands has taken a range of loans, and there are some excellent examples of how debt has helped the country. The most recent example was the loans that we took on over COVID. This money was used to keep the economy flowing with programs like the Wage Subsidy scheme. This money was used to keep the country running, at a time when the borders were shut, and the economy was looking dicey.

Ko tētaʻi ʻākaraʻanga ko te tāraʻuʻanga tei raveʻia mai nō te ʻakameitaki i te Uāpu i Avatiu. Kua rauka ia mātou i te ʻakameitaki i tūranga kia tau ki tō tēia rā e kua rauka i te tauturu i te au paʻī e teretere nei ki roto i tō tātou ipukarea. Nāringa kāre, e au paʻī rikiriki ʻua tō tātou e kāre e tau ki tō tātou anoano e ka teitei te tūtakiʻanga o tiki pakau mei vaʻo mai no te ʻapai mai ki Rarotonga nei. Noātu e kua teimaʻa te ʻapainga i te tarauʻanga ki runga i te Kavamani, kua totoʻa ra te meitaki ki te kātoatoa.

Another example is the loans that we took to upgrade the Avatiu Harbour. This allowed us to make the Port a more modern operation that is able to accommodate the current ships that service the country. Without it, we could only have smaller ships, that were less reliable and the costs of importing into Rarotonga would likely have been much higher. Even though the cost of the loans are felt by the Government, the benefits flow to everyone.

Ka rauka katoa ia tātou te tāʻangaʻanga i te tāraʻuʻanga tauturu tūpoto, ei tiaki ia tātou me tupu ake tētaʻi manamanatā nātura me kāre te ʻarapakiʻanga tūpoto ki te oraʻanga kōpapa tangata. Kāre tēia i kiritiʻia mai ake ʻinārā te vai nei ki roto i te vairanga mei te $33.5 mirioni mē ka ʻinangaro tātou i te reira

We also have access to an emergency loan, to cover us in case of a natural disaster or a health emergency. This is currently not drawn down, but up to $33.5 million is available should we need it.

E pūʻapinga maʻata to te tāraʻuʻanga tau, noātu ē tē rave ra koe nōʻou rai me kāre nō te ipukarea. Ei tauturu i te tāraʻuʻanga tau ka anoanoʻia tātou kia āru i tēia au ture. Ka riro i te ʻakapāpū e kia ʻakatere meitakiʻia te tūranga o te ʻakakaioʻuʻanga.

Responsible borrowing is important, whether you are doing it personally, or as a country. To help us borrow responsibly, we operate under a number of rules. These rules make sure our debt position is under control.

1. Auraka e maʻata kino tā tātou ka tāraʻu – Kia noʻo te revera i te katoaʻanga o te kaioʻu ki raro ake i te 55% o te Pūʻapinga Bāsileia (GDP) ʻinārā ka rauka katoa i te ʻakakake ki te 65% o te Pūʻapinga Bāsileia mē ka tāʻangaʻangaʻia nō te tuʻanga ʻakapūʻaping. I tēia ʻatiʻanga kua tāmanakoʻia e, ko tā tātou kaioʻu e 30% o te Pūʻapinga Bāsileia i te marama ko Tiunu, mataʻiti 2025. Tei raro roa ake tēia i ta tātou ʻakakōtingaʻanga me ʻakaʻaiteʻia ki tō tētaʻi au Bāsileia kē. Ko tētaʻi au ʻākaraʻanga nō te au vāitoʻanga i tēia ʻatiʻanga, te kaioʻu a te Kavamani Nutireni e 42%, Autireria 31%, Viti -78% e to Marike e 124%.

We don’t borrow too much – Total Debt levels are to be below 55% of GDP (Gross domestic product) generally, but can go to 65% of GDP if used for infrastructure. Currently our debt is forecast to be 30% of GDP as at June 2025 . This is well under our limit, and compares very favorably to other countries. For example on most recent measures; New Zealand’s net government debt is 42%%, Australia’s is 31%; Fiji – 78%, or even the United States, which is at 124%!

2. E matakite ana mātou i te au tūkaui pōrena – e ʻakakoro ana mātou i te ʻakaiti i te nūmero kaioʻu ki roto i te moni pōrena – i tēia ʻatiʻanga ko te kaioʻu pōrena e 34% te reira.

We manage our overseas risks – we aim to minimize the amount of debt in foreign currency - now the foreign debt is 34%

3. E ʻakakōtinga ana mātou i te kaioʻu tē ka taui tōna tūranga moni ʻakamāuruuru – i tēia ʻatiʻanga e 63% o tā tātou kaioʻu e pāpānu nei e te āru nei i te au tauīʻanga a te Nutireni me kāre tā Marike

We limit debt where the interest rate can change – currently 63% of our debt is floating and changes with rates in New Zealand or the United States

4. E tūtaki ana mātou i te rēvera ʻakaʻaka o te moni ʻakamāuruuru – ko tā mātou tūtakiʻanga tāraʻu i oti ʻuāke nei e 1 % moni ʻakamāuruuru, ka tuatua tātou i reira e ko tā tatou revera moni ʻakamāuruuru e 4.0% te reira

We pay low rates of interest – our most recent loan was at a 1% interest rate, and in general our current average interest rate is 4.0%

Ae kua mārama ʻua tātou e ka tūtaki tātou i te tāraʻuʻanga moni. I tētai au ʻatiʻanga kua rauka ia mātou i te pati i tētaʻi tuātau ʻakatanotano, kia kore e tūtakiʻia vivivkiʻia te kaioʻu, mē kāre ka akamata matou i te tūtaki mārie i te kaiou i taua ʻatiʻanga rāi. Ei rāvenga i te ʻakapāpū e ka rauka ia mātou i te tūtaki i te tāraʻuʻanga e tuʻanga moni tā te MFEM i ʻakakoro tei ʻakakikiʻia i te tuātau ʻakatuʻangaʻnga moni mataʻiti, e pēra katoa mei roto mai i te moni tero tē ka tāʻangaʻangaʻia i te tūtaki i te au taraʻuʻanga moni.

The loans, of course, need to be paid back. Sometimes we have been able to negotiate a grace period, where we don’t need to make repayments immediately, or we start paying the loan back immediately. To make sure we can pay back the loans, MFEM has a specific fund that is filled up at each budget round, from taxation, to make upcoming loan payments.

Ko tētai au tāraʻuʻanga moni tā mātou i rave i te tuātau Kōviti kua anoanoʻia kia tūtaki vivikiʻia e kāre i ʻāite i tētaʻi au tāraʻuʻanga tā mātou ka tūtaki(ki roto i te ngaʻuru mataʻiti) e kua ʻāru te rēvera o te moni ʻakamāuruuru ki te vaito o te tūtakiʻanga moni ʻakamāuruuru o te au ʻenua i tai mai. Kua rauka ʻia mātou i te ʻakatere meitaki i tēia au tāraʻuʻanga moni, nā roto i te kiritiʻanga i tetaʻi au kaioʻu ʻōu tē kā roa te tuātau tūtakiʻanga e te ʻakaʻaka katoa tā rātou rēvera moni ʻakamāuruuru. Kua ʻakameitaki te reira i to mātou tūranga moni, e e tikaʻanga meitaki tētaʻi nō mātou i te tūtaki i tētai au kaioʻu ʻakapouʻanga teitei.

Some of the loans we took out over COVID needed to be paid back quicker than other loans (inside 10 years), and had interest rates that increased in line with overseas interest rates. We’ve been able to manage these loans well, by taking out some new debt that has longer payback period and a lower interest rate. This has improved our cash position, and there is a good chance we could pay off some of our higher cost debt.

Ka karanga tātou i reira e kāre te kaioʻu i te ʻapinga kino ʻē mē rave meitakiʻia ka tauturu tē reira i te ʻakamātūtū i tō tātou ipukarea. Kua ʻakatereʻia tā mātou raveʻanga ʻangaʻanga e te ture e ko tōna ʻāiteʻanga kāre mātou e rave ana i te ʻakakaioʻuʻanga rēvera teitei, mē kāre te ʻakatuera ʻia mātou ki te au tauiʻanga ki roto i te rēvera moni ʻakamāuruuru mē kāre tiēniʻanga moni pōrena.

In summary, debt is not a bad thing, and done well can help build our nation. We operate under rules that mean we don’t take on high levels of debt, or open ourselves up to changes in interest rates or changes in foreign exchange.

For enquires related to this release, please email: mfem.economics@cookislands.gov.ck