When the coalition government came to power last year, it announced a so-called Pacific reset to New Zealand's foreign policy, and this year's budget saw a surge in funds for the foreign ministry.
In a speech on Friday, Winston Peters announced what he called the next steps in that reset, saying his eyes were wide open to "New Zealand's decreasing influence" in the Pacific.
Mr Peters said New Zealand is looking to redefine its spending by partnering with others in projects which last for 50 years or longer, pointing to support for a Kiribati land reclamation project.
With that, Mr Peters announced the establishment of the development fund, which he said would allow the country to be flexible and responsive to the needs of Pacific countries.
He spoke of strengthening partnerships, while at the same time referring to New Zealand as a "self-reliant" small state.