From the House, by Pesi Fonua

Tonga's biggest annual budget of $483.7 million Pa'anga was presented to the Tongan Parliament by the Minister of Finance, Hon. Dr 'Aisake Eke this morning, 11 June.

The 2014-2015 National Budget is 35% more than the 2013-2014 budget of $357.6million. It is also historical document in that 59% of it is financed with budget support funding from aid donors, and the remaining 41% from Tonga's own financial resources.

'Aisake told the House that government would finance its portion of the budget with earnings from  the sales of $26 million of government bonds.

The aid donors who will finance 59% of Tonga's 2014-2015 national budget are: the World Bank, Japan, China. Asian Development Bank, Australia, New Zealand, EU Budget Support, Pooled Funds – Australia and New Zealand, Pacific Islands Forum Secretariat, United National Development Program, Secretariat of the Pacific Community, World Health Organisation, and there were also “unconfirmed” donors.

'Aisake also told the House that with the 2014-2015 budget special care was given to the allocations for the Ministry of Justice, the Auditor General, and the Commissioner of Public Relations. The budget allocation for the Ministry of Justice will increase by 32%, the Auditor General by 75% and the Commissioner of Public Relations by 325%.

The 5% COLA for the salaries of public servants will continue; he also reminded the House that government still owed the public servants retirement fund $17 million.

In an effort to free the Tonga economy from what the Minister of Finance referred to as an "Economic Trap" he said special attention has been directed toward upgrading infrastructures such as airports. There were also concessional loans at 1% interest to the Agriculture Marketing Fund, Fisheries Development and Export Fund, Tourism Fund, Manufacturing Fund, a Student loan Scheme, and an Economic Growth Facility of $10 million at 4% interest.

'Aisake also told the House that the Reserve Bank Act will be amended, making it possible for the Bank to direct funds to government. This capital fund will be managed by the Tonga Development Bank TDB, which could offer loans at 4% interest.

Loans from China

'Aisake expressed his concern over Tonga's external debt, particularly relating to the repayment of its multi-million dollars loan from China for the reconstruction of Nuku'alofa. He said that China had agreed to defer the repayment of the principal amount for another 10 years, but the Minister had set up what he called a "Sinking Fund" in preparation for when Tonga will start repaying China the $119 million (USD) loan.

In addition to the loan for the reconstruction of Nuku'alofa, the Tonga government bought back the majority shares of Janfull International int the Dateline Hotel by settling their unpaid loan of $11 million, also from China.

Meanwhile, the Tongan government had been paying only the interest on the Chinese loans. The interest amounted to $5.3 million pa'anga a year since 2011.

Questions

Sione Taione, a Tongatapu People's Representative expressed his concern over how some property owners had got their multi-million pa'anga buildings constructed and rented out, but had not signed a loan agreement with government. There were others who had signed a loan agreement and were renting their properties but had not repaid their loan to government.

Tonga's loan arrangement with China for the reconstruction of Nuku'alofa was for the Tongan government to borrow from China and then lend to property owners in the Nuku'alofa CBD whose properties were destroyed during the riots of November 2006.

Dr Sitiveni Halapua, a Tongatapu People's Representative also expressed his concern over the reliance of Tonga on foreign aid donors to balance the national budget, he compared the exercise to one building a family home with donor's fund so that at the end one would feel that the donor owned the home.