Concerns over Aust-Pacific loans scheme

Australia's $2 billion loan scheme for Pacific infrastructure has been accused of potentially loading up island nations with debt in the same way China has.

A report into the Export Finance and Insurance Corporation has recommended that an expansion of the scheme pass parliament.

But the Greens argue the scheme does not require the projects Australia funds to be in the national interest of Pacific nations.

"EFIC has a mandate to put Australia first, not the Pacific," the Greens' dissenting report read.

"The Australian Greens are deeply concerned that this bill does not put Pacific needs first and may lead to outcomes against the national interest of the recipient countries."

Australian National University professor Stephen Howes said there is a risk the EFIC reforms will undermine Pacific governments by encouraging a non-competitive approach to infrastructure.

"This is widely perceived to be a problem with Chinese export credit to the Pacific," Prof Howes said in a submission to the report.

"EFIC projects, even if commercially viable, may be against the national interest of the recipient country in a poor policy environment."

Prime Minister Scott Morrison announced the EFIC expansion in November as part of his "Pacific step up" program.

Australia has been increasingly concerned about China's rising influence in the Pacific, especially with the potential for island nations to be loaded up with unsustainable debt.

But Mr Morrison has previously said the EFIC loan scheme included $500 million worth of grants, which Pacific nations would not have to repay.

The Greens also argue the bill should not be passed, but if it is, it should be modified to make sure it does not fund fossil fuel export projects.