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Tonga's reform loan used to pay civil servants, Minister reveals

Nuku'alofa, Tonga

Tonga's US$8.2 million loan from the Asian Development Bank in 2002, earmarked for the government's Economic and Public Sector Reform Program, has been nearly all spent on paying civil servants, the Minister of Finance, Hon. Siosiua 'Utoikamanu revealed to Parliament this week.

He said that part of the loan was used to pay what government owed to the Civil Servants Retirement Fund, and to finance the Voluntary Redundancy Packages that were given to 815 civil servants on June 30.

"The loan has been nearly all spent on the repaying back of what government owes the retirement fund, and the voluntary redundancy, and what's left is being spent on the drafting of tax legislation to be introduced to the House this year," he told the House on Monday September 4.

The Minister of Finance said that the loan at 1.5% interest was used in 2002 to prop up Tonga's Foreign Reserve, and therefore assisted the Private Sector, "it restored their confidence in the economy, and stopped them from transferring their money overseas." He said that at that time the Foreign Reserve had dropped into a low that was enough for only 1.5 months of imports. The US$8.2 million loan, the equivalent of about $20 million Tongan Pa'anga raised Tonga's ability to import to three months.

The Ha'apai No. 1 People's Representative, 'Uliti Uata, who probed the Minister on the Reform Loan, expressed his disappointment that the Minister gave the Private Sector and the public at large a false sense of security, "because everybody was wondering how did we manage to double our Foreign Reserve?"

The Minister insisted that everything was legal and it was supported by parliament. He pointed out that in order for the ADB to release the remaining 50% of the loan in 2002, the government was to fulfil six obligations -

1. To pass the Public Fund Management Act.

2. To improve the Revenue Administration Act.

3. To pass the Public Enterprise Act.

4. To pass the Public Service Act.

5. For the Prime Minister's Office to establish the Information Unit.

6. For Central Planning to establish a unit to monitor the impact of the reform.

He said that parliament had passed all these pieces of legislation.