From Matangi Tonga Magazine, Vol. 13, no. 3, October 1998.

The value of the Tongan pa‘anga has continued to drop against the currencies of Tonga’s major trading partners during the past eight months.

The Australian dollar now costs Tongans nearly 6 seniti more, the New Zealand dollar 3 seniti more, the US dollar 22 seniti more, and the English Pound 44 seniti more. The pa‘anga remained 12 seniti up against the Fijian dollar, while its value against the Japanese Yen remained about the same.

However, Afu‘alo Matoto, at the Bank of Tonga said in early September that the Tongan pa‘anga was still going down against most currencies, “even against the Fijian dollar, which was devalued by 20 per cent earlier this year, but it has regained  about 10 per cent.”

Afu predicted that the depreciation of the Tongan Pa‘anga would continue, “and it will become more pronounced toward the end of the year,” he said. “The big problem is simply because we have very little exports,” but he believed it was time for the government, financial institutions, and the private sector to get together and make a definite plan on what to do to boost Tonga’s foreign earnings. “If it is tourism, agriculture or fisheries then lets get our act together,” he said.

“The fundamental problem is that the Reserve Bank has not once come out to tell us their Monetary Policy.”(story page 24)

Afu said that the approach by the Reserve Bank to cut down on loans, therefore discouraging the buying of imported goods was not very effective, “because commercial banks in Tonga are not as liquid as the Bank of Tonga. In addition while we are discouraging lending to the private sector and the public, there is heavy borrowing by government’s statutory bodies and companies.”

Viliami Sevele, the Assistant Manager Treasury and International for ANZ Bank, said that, “the Reserve Bank opted for a gradual depreciation rather than a sudden devaluation of the Pa‘anga by, say 20 per cent, like they did in Fiji. I think it was a good idea, but unfortunately they must have leaked out the information because before we received a notice here of their intention, we wondered why a number of people and businesses were moving a substantial amount of cash overseas, therefore I don’t think it was very successful in their approach of a gradual devaluation of the Pa‘anga,” he said.