MEDIA RELEASE: “Review of the Economic Situation of the Kingdom of Tonga- International Monetary Fund (IMF) Team”
(3rd March, 2020)
The Cabinet has approved and noted on February 24, 2020, of the outcome of the review by an International Monetary Fund (IMF) team, who recently visited Tonga, and conducted the comprehensive review of the economic performance, and the current situation of the economy of Tonga.
In their findings, Tonga’s economy is gradually recovering after the stagnating (slow growth) in the Financial Year 2018, due to the effects of Cyclone Gita, (and off course the outstanding works, yet, to be completed on Cyclone Ian in Ha’apai in 2014).
The growth is estimated at 3% in FY 2019, which was driven by the stronger consumption of the people, as was financed by the constant remittances from the Tongans overseas, and supported by effective monetary policy, and credit growth.
It is noted that the economic growth was slower due to market losses after the Gita cyclone, that had significantly reduced Tonga’s export capability, and thereby relied heavily on imports (from overseas markets and from Vava’u).
It was also noted of the excellent policy management by Government, that resulted in a strong macro-financial outcome, as reflected by the Low Inflation, the 4th consecutive budget surplus, and the proven stability in the financial sector.
It was noted that the economy is facing challenges that needs to be addressed soon, and those are: narrow production and economic base, the lack of economies of scale (due to a very small domestic market) and the high vulnerability to natural disasters. In addition, are the loss of skilled labors to emigration (but increases remittances proportionately) and seasonal fruit workers in Australia and New Zealand.
The remittances have contributed significantly to reducing of poverty, creation of new economic opportunities, and financing of the heavy dependence on imports (especially on fuel, construction, and foods), as well.
Microsoft Word – Media_Release_03_03_2020_“Review of the Economic Situation of the Kingdom of Tonga- International Monetary Fund (IMF) Team”.docx
Tonga is also in a high debt distress with repayments, as set, to spike from 2024 onwards.
Microsoft Word – Media_Release_03_03_2020_“Review of the Economic Situation of the Kingdom of Tonga- International Monetary Fund (IMF) Team”.docx
It was therefore recommended as follows:
Microsoft Word – Media_Release_03_03_2020_“Review of the Economic Situation of the Kingdom of Tonga- International Monetary Fund (IMF) Team”.docx
- To Increase and concentrate on boosting the private sector development;
- The need for more budget surpluses, to allow a sufficient build-up of fiscal buffers for debt repayment;
- To Increase the Emergency fund to meet unexpected climate related shocks;
- The Rationalizing of the taxation regime to allow for sufficient reserves;
- Re-orienting of the Government’s spending policies towards improving of the public sector capacity, and value for money;
- Rationalizing of civil services functions;
- Identifying and staffing of critical positions and introduce schemes to reduce staff turnovers;
- Introduce policies and schemes on land issues, and investment policies, to attract large and wealthy investors;
The complexity and non-transparency and delays in the operation of the land market, is critical to attracting of large investors, and strategically expanding of the production and economic base of Tonga.
In conclusion, the economic performance of the economy of Tonga is gradually growing, and has the potential to grow stronger, once the above recommended action, are in consideration and in cooperated, in the national planning priorities, and in the national implementation processes.
–ENDS–
Issued by the: The Prime Minister’s Office, P.O. Box 62, Nuku’alofa, Tonga. Tel: (676) 24644 Fax: (676) 23888; For media enquiries- Email: pressroom@pmo.go.to Website: www.pmo.gov.to
