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 spelled out in the World Bank Economic Update for East Asia and the Pacific 2015 that was published on Monday, April 13.

Tonga’s two large external loans of $233.3m 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% 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 Fedearted States of Micronesia, Kiribati, Palau Repubc 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.”

Contracted

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

In 2014 the devastating cyclone that hit Haapai has resulted in donor-supported programme to rebuild and repair the damage and this has stimulated growth. The net effect is positive, with growth estimated at around 2%.

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 has “successfully been able to mobilize  grant and concessional credit financing whilst gradually improving domestic revenue collection, which has risen from 18.4% in 2012 to 19.8% in 2014.”

2015-16

The direction where the new government of Prime Minister, Hon. ‘Akilisi Pohiva is going to take the Tongan economy in the next four years will come to light when the Tongan parliament debates the new government’s 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 has stated in public that there will be a cut in government spending.

Continue to strive

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.”