Gov’t to start repaying VT1 billion Air Vanuatu loan

October 27, 2025 9:37 pm | Posted in Business News | Share now TwitterFacebook

By Anita Roberts.

The government will disburse the first instalment of Air Vanuatu loan at VT250 million in the week following a Guarantee Agreement signing last Friday.

This was conveyed by the Vanuatu National Provident Fund (VNFP) in a statement after the signing between the Deputy Prime Minister (DPM) and Finance Minister, Johnny Koanapo, and the VNPF General Manager, Paul Kaun.

Air Vanuatu Operations Limited (AVOL) has borrowed two commercial loans from VNPF totalling VT1 billion guaranteed by the government. The first VT340 million funding was made in 2019, and the second loan of VT660 million was made in 2013.

The Daily Post understands that AVOL borrowed the loan at an interest rate of 6.75% a year and a penalty rate of 2%. With its default payments, surcharges will continue to accumulate until the debt is paid off.

The national airline has been repaying the loan faithfully until 2020 when it faced challenges due to the COVID-19 pandemic.

As of May last year, the total balance of the loan was VT1, 120, 491, 744, according to the VNPF Board.  This outstanding includes principal, interest and fees relating to late repayments.

In its statement to announcement the Guarantee Agreement, VNPF said: “Following the liquidation of AVOL on 9 May 2024, VNPF and the Government engaged in extensive discussions to address the debt.

“As part of this Agreement, the government has committed to repaying the principal amount of VT1,000,000,000, along with accrued interest and penalties, totaling VT120,982,827.

“Furthermore, it has been agreed that the government will disburse the first installment of VT250,000,000 to VNPF in the week following the signing of this Agreement.

“The government will also fulfil its obligation to pay the remaining outstanding amount of VT870,982,827 as stipulated in the forthcoming facility agreement, which will be executed by both parties within 90 days of signing this Guarantee Agreement.”