Thirty years ago Nauru rivalled Brunei as the region's richest country per capita, owing to its huge phosphate deposit, exported to make fertiliser.

Millions of US dollars have since been squandered through bad investments, poor financial advice and get-rich-quick-schemes, including backing a short-lived West End musical about the life of Leonardo da Vinci.

The islanders' purchases were as lavish as they were foolhardy. A police chief bought a new Lamborghini, only to find he was too big to fit into the driver's seat.

By the 1990s, Nauru was selling passports to foreigners and was home to shell banks laundering Russian mafia money. Not long after, it was blacklisted by the Organisation for Economic Co-operation and Development.

In 20 years, about A$2 billion worth (HK$11 billion) in phosphate revenue has gone into the pockets of corrupt ministers or foreign profiteers masquerading as advisers.

After years of reckless spending, Nauru is almost bankrupt. The island owes A$236 million to General Electric Capital, which wants it back.

'People can only afford to buy rice, sugar and flour,' said Sean Oppenheimer, 37, who runs the country's only supermarket. 'Gone are the days of being able to afford steak or chicken. You wonder how people survive.'

Nauru's huge overseas property portfolio - bought in the heyday of the phosphate boom - is in the hands of receivers and being sold off to pay the debt.

The government, led by President Ludwig Scotty, put together an ambitious economic reform package. But the budget was stalled earlier this year when the health minister was declared ineligible for office because he held joint citizenship with Australia.

Nauru's tiny 18-member Parliament was dissolved, a state of emergency declared and a snap election called. A group of reform-minded younger ministers squared up against an old guard which presided over the island's stunning economic decline.

'The whole population has that 'what-could-have-been' feeling that just lingers through everything,' said Kieren Keke, one of the new generation of politicians. 'There was so much potential to do better with the money we had.'

With phosphate reserves almost exhausted, Nauru is looking at commercial fishing and, somewhat optimistically, tourism, to sustain its future.

This despite the fact there are two hotels and a single road. The Lonely Planet guide to the South Pacific advises that 'one day, or at most two, is plenty to see Nauru'.

'Something must be found to sustain the island,' said Helen Bogdan, the country's public affairs officer in Australia. 'Having dragged people into a 21st-century, western lifestyle, you can't just tell them to go back to collecting coconuts and catching fish. It's not fair.'