Tonga's ability to trade remains precarious [1]
Thursday, June 1, 2000 - 10:00. Updated on Tuesday, January 19, 2016 - 16:16.
From Matangi Tonga Magazine Vol. 15, no. 2, June 2000.
While Tongans are being told that their economy is growing at a record pace, at the same time they are faced with the hard reality of the declining value of their currency and the erosion of the foreign reserve.
A report by Tonga’s Ministry of Finance that Tonga attained an economic growth of 6.1% during the current financial year, and that Tonga’s Gross Domestic Product had reached a record high of $251 million, looked good. But the two other figures which concern particularly the business people, are the size of Tonga’s Foreign Reserve, and the value of the Tongan pa’anga against the currencies of our main trading partners, Australia, New Zealand, USA and Japan.
The latest figure from the National Reserve Bank of Tonga showed that during May the Foreign Reserve declined by $2.4 million to $28.9 million, which is enough for 2.9 months of imports.
Tonga’s imports continue to grow. In 1999 imports increased by 12.9% from $102.4 million to $116.5 million. This is many times more than our exports during the same time , which went up by 42.17% from $11.6 million in 1998 to $20 million in 1999. These figures show that Tonga’s trade deficit went up by 6.28% from $90.8 million in 1998 to $96.5 million in 1999.
So until we boost exports to satisfy our thirst for foreign goods, the main source of foreign earnings that we have to rely on are remittances from Tongan overseas and from foreign aid.
Meanwhile, the Tongan pa’anga in 1998 started on a downward spiral against the currencies of our main trading partners. It hit an all-time low on May 19 when $TOP1 was worth .5668 cents USA. Foreign exchange rates from commercial banks showed an upward movement but most agree that it will never return to the $TOP1 to .80 US cents rate that we enjoyed in 1998.
The irony of the situation is that despite an apparent growth in the local economy our ability to trade with the rest of the world remains more precarious than ever.