Gov’t forced to honour guarantee on failed $18 million project loan after road contractors fail to pay up

Prime Minister Hu’akavameiliku says negotiations are in progress with the bank as part of the government’s attempt to repay a multimillion loan debt it guaranteed by putting the assets used as security on sale.  

Dr Pōhiva Tu’i’onetoa. Photo/Kalino Lātū

He was responding to questions raised in Parliament asking him to explain the repayment of the $18 million loan to fund what appeared to be a failed government roading project.

Hon Hu’akavameiliku did not deny claims that the bank, apparently the Tonga Development Bank had pursued legal actions against some of the debtors which failed to repay their loans.

The government acted as a guarantor for the debtors namely the state-owned Lulutai airlines, and three other privately owned companies the former government contracted to build new roads under the toppled Prime Minister Pōhiva Tu’i’onetoa’s failed multimillion roading project.

The three privately owned companies included the Island Dredging, the Inter-Pacific Limited and the City Engineering and Construction Limited.


The project was stopped at the end of 2021 after Tu’i’onetoa was ousted from power after losing the premiership election.

The controversial project attracted strong criticisms and backlash from the public after the Tu’i’onetoa government was accused of designing the tendering process so the contracts would be given to its friends including Cabinet Ministers’ closed family members.

Critics also blasted the former government for what appeared to be favouritism and nepotism involved in the way the projects were distributed. The roading project was a three-year plan set to run from 2020 until 2023.

Critics predicted at the time that the project could collapse and the multimillion loan would end up being paid by the taxpayers.  

Ministry to operate quarries

Hon Prime Minister Hu’akavameiliku said the government has yet to pay any money to the bank.

Hon Hu’akavameiliku

He said the negotiation included a proposal for the bank to allow the Ministry of Infrastructure to operate some of the quarries, the assets granted in guarantee, to pay back the loan.

The revelation comes after the former Minister of Finance and MP for Tongatapu 5 Dr ‘Aisake Eke asked the government in Parliament whether the borrowers still paid their loans according to their agreements with the bank.

Dr Eke reminded the government that if the borrowers failed to pay the loan the government has a legal obligation to repay it.

Dr Eke said these companies owed a total of $18 million pa’anga to the bank.

The Prime Minister did not directly answer Dr Eke’s query about the borrowers’ obligation to pay back their loans. He said he could not go into details because the loan now involved legal actions.

As Kaniva News reported last year, the government reached an in principle agreement to sell the national airlines to the privately-owned Flyniu airlines.

The government said at the time the Lulutai airlines was available to be purchased and it was looking for buyers and companies with interests in operating the flight services.

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