From Matangi Tonga Magazine Vol. 14, no. 1, January 1999.

Editor's Comment By Pesi Fonua.

There's no recovery in sight for Tonga’s continuing economic recession. 

The major players who could either toss the fish from the frying pan into the fire or onto the dinner table are the Tonga National Reserve Bank, the Treasury, the government ministries and the private sector. And the sooner that these players can function in unity, the sooner Tonga can start to pull ahead.  

Unfortunately, these sectors have difficulty in working together. While the Tonga National Reserve Bank is enforcing restrictions, including a 30 per cent deposit on bank loans, the commercial banks are not happy because it restricts their business and has forced away borrowers.

The Treasury, meanwhile, thinks that the Reserve Bank is over-reacting since the Foreign Reserve has bounced back from a record low of $18 million in August last year to $35 million in December. The Treasury believes that the Reserve Bank’s restricting of the flow of capital into the domestic economy restricts the growth that could eventually result in more exports to boost the Foreign Reserve. More importantly, the Treasury has reason to be concerned because about 60 per cent of government revenue comes from customs duties, and the restriction on loans is slowing down imports and cutting down the main source of revenue for the Treasury.

While the Treasury is in desperate need of revenue to finance government’s activities, they have been bombarded by requests from some in the private sector who want to be bailed out from failed ventures in the export of vanilla, squash and also in tourism. There is a strong feeling in Treasury that the private sector is always eager to point fingers at government, but they are not all very efficient themselves.

The privatising of some of the government’s operations is also getting well underway. A Port Authority has been established and a closure of the government store is expected to take place before July.

The Treasury’s proposed cut of $3 million in the government’s recurrent budget for the coming financial year, in order to finance a new contributory pension scheme for public servants will definitely bring poorly-funded ministries into conflict with the Treasury. But at the same time, there is a strong feeling in Treasury that there should not be any hardship in government ministries if they prioritise their expenditure and cut down on travelling.  

The private sector is left wondering if the cuts in spending will cripple their businesses. But the Treasury says that launching of the new Pension Scheme has to be done to cut down on government spending on the existing scheme, which has amounted to nearly $14 million.

All the players are pursuing their own solutions to Tonga’s troubled economy, but it seems there’s still a missing link in getting the gang to work together.