New Caledonia’s finances are in the red
The loan granted by France will allow New Caledonia to balance its budget. Emmanuel Macron’s minister explained that this loan would secure the entire social system. He was referring in particular to the pension system and the health system, which, as everywhere in France, are as generous for Caledonians as they are expensive for the institutions. The sum amounts to 175 million euros, or 21 billion CFP francs.
A very high debt ratio
The Minister for Overseas Territories said it was not possible “to grant the entire loan” requested by the local government of Louis Mapou. This is because of the debt ratio of New Caledonia, which is 160%. Indeed, it should be noted that a state-guaranteed loan of 240 million euros (or AUD 380 million) has already been granted to New Caledonia, in 2020, to deal with the health crisis.
The budget, then the reforms
The loan will allow the adoption, before the end of March, of a balanced 2022 budget. Louis Mapou’s government is preparing a series of radical reforms. In particular, there will be a major tax reform to combat deficits. This will not be easy to implement, as the political spectrum in New Caledonia is very divided.