Pacific Media Watch

15 April 2015

TONGA: Fiscal risks on the horizon for Pohiva government

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The World Bank Economic Update for East Asia and the Pacific 2015 report ... a warning for Tonga.

NUKU'ALOFA (Matangi Tonga Online /Pacific Media Watch): The World Bank has warned Tonga of large fiscal risks which are lurking in the horizon, “the repayment of its two external loans, the financing of the 2019 South Pacific Games, and the periodic large public servant wage demands".

The warning was spelt out in the World Bank Economic Update for East Asia and the Pacific 2015 published on Monday.

Tonga’s two large external loans of $233.3 million from the Export-Import Bank of China, the estimated TOP$130 million pa'anga that Tonga has to find to honour its commitment to host the 2019 South Pacific Games, and the 22 percent salary rise that the Public Service Association (PSA) has been demanding from government are viewed as large fiscal risks.

The World Bank stated that the Small Pacific Islands economies of the Federated States of Micronesia, Kiribati, Palau, Republic of Marshall Islands, Samoa, Tonga, Tuvalu and Vanuatu experienced moderate growth during 2014 “driven by stimulus from donor financed aid projects and recovery from recent natural disasters".

Economy in decline
Meanwhile, the Tongan economy is estimated to have contracted by just over 2 percent in 2013.

In 2014, the devastating cyclone that hit Haapai had resulted in donor-supported programme to rebuild and repair the damage and this had stimulated growth, the report said.

The net effect was positive, with growth estimated at around 2 percent.

Hurricane Ian could be regarded as a "blessing in disguise" for the Tongan economy.

The report also praised the former government of Prime Minister, Lord Tuivakano, for its able managment of the fiscal accounts and had “successfully been able to mobilise grant and concessional credit financing while gradually improving domestic revenue collection, which has risen from 18.4 percent in 2012 to 19.8 percent in 2014".

Future plans
The direction where the new government of Prime Minister, ‘Akilisi Pohiva, would take the Tongan economy in the next four years would come to light when the Tongan Parliament debated the budget of 2015-2016.

It has been a long wait since the new government came into power at the end of 2014, although the Prime Minister had stated in public that there would be a cut in government spending.

A Tonga Strategic Development Framework TSDF II, with a vision for “A more progressive Tonga: Enhancing our inheritance” has been in circulation since March.

The vision, according to the architect of the TSDF II, the Ministry of Finance, is that “under God’s blessing and the natural resources and physical beauty of Tonga we have a sound base on which to progress. We will continue to strive to have an educated and healthy people – a people who now embark together on the development of a more democratic and inclusive society".

The World Bank Economic Update for East Asia and the Pacific 2015

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