From Matangi Tonga Magazine Vol. 15, no. 2, June 2000.

By Pesi Fonua

Tonga’s first budget for the 21st century is the biggest and probably the most controversial budget that has ever been presented to the Tongan Parliament.

The main thrust of the 2000-01 Budget is a plan by the government to borrow $15 million from the Asian Development Bank.

The loan will enable government to pay $9 million to the departing Cable and Wireless plc. The money will help to repay a debt on a 13 year old loan for the purchase of a Troposcatter, which ceased to operate years ago and which was never in full operation since it was established in 1987 for Tonga Telecom’s inter-island telephone service. In addition, government will also purchase the international telephone plant of Cable and Wireless plc, so that when the company leaves Tonga on July 3, government will take over the running of Tonga’s international telephone service.

The ADB loan will also pay for a salary increase for civil servants. $4 million of the loan money will be spent on a 20 per cent Cost of Living Adjustment of the wages of public servants. The rest of the loan will be for the payment of government bonds that will mature during the new financial year.

Government considers that $9 million to be paid for Cable and Wireless plant, as an investment, which they forecast will bring in an income of $4 million during the new financial year.

At the end, according to the Budget Statement of the Minister of Finance, there will be fiscal surplus of just over half a million pa‘anga.

The Budget Statement heralds a GDP economic growth rate of 6.1% (real term) for 1999-2000, being a dramatic increase from 4.6%, and quite outstanding compared to most other Pacific Island countries. At the same time the government’s total outstanding debt for 1999-00 is expressed as amounting to “approximately 44% of Gross Domestic Product”.

Despite a grand statement of intent, the Minister of Finance had little to say in real terms of what his Budget had to offer the unemployed, the elderly, the young people, students, farmers, the private sector, and others.

Hon. Tasi Fakafanua said that since the introduction of Program Budgeting the annual government’s budget was, “No longer my budget, it is the Cabinet’s budget and you may have noticed during the debate in the House that other ministers are speaking out, supporting the Budget.” Tasi said that the 2000-01 Budget “Remains with efficiency, that is what this budget is about.”

Tasi did not expect much from the local economy this year, even considering that some of the $6 million allowed for the COLA will be spent locally.

One industry that has been rewarded this year is the fishing industry. Starting on June 1, diesel fuel and lubricants to commercial fishing vessels in good standing may qualify for a duty free concession. The budget statement noted that Agriculture, Forestry and Fisheries remained the most important industries.

Noticeably missing from the Budget is any significant support for the multi-million projects that the King announced during the opening of Parliament on May 25. He talked about the purchase and the farming of land in Hawai‘i, the establishment of a market for Tongan produce in Pago Pago and Samoa, and the formation of a Tongan Corporation.

Tasi said that the King was a visionary and he was, “well ahead of us. This is just a start for us.”

The 2000-2001 Programme Budget Estimate included:

Overall budget

Total government expenditure - $126.97 million, (being total cash expenditure – $108.54 million, and total in-kind expenditure - $18.43 million.)

Sources of cash funding - $108.54 million (80% from Govt. General Revenue, 8% overseas development assistance, 8% from Govt. Revolving Fund, 2% from Trust fund and 2% from ADB loans.)

Expenditure

Current cash expenditure $83.05 million. (Education 13%, Health 10%, Prime Minister’s Office 7%)

Capital Expenditure - $11.71 million.

Revenue

Current Revenue - $70.78 million (75% from taxes—66% is Custom Duties and Port and Service tax, and 19% from Income tax).

25% from non-tax – administrative fees, charges and entrepreneurial and property income.

Cash grants and other funding

$18.95 million (44% $8.33 million Foreign Aid, 47% $8.88 million revolving fund, 7%  $1.30 million Trust Fund and 2% $0.44 million local contribution).

Fiscal Balance

Recurrent expenditure -    $87.23 million
Recurrent revenue -        $87.74
Surplus -                $0.51 million

Government Debt

Outstanding debt for 1999/00 is approximately 44% of GDP.

Tonga

Total exports for 1999  $20 million (up 42.17%).

Total imports for 1999 $116 million (up 12.9%).

Trade balance deficit 1999 $96.5 million (up 6.28%)

Foreign Reserves, December 1999 $34.6 million.

GDP per capita ($US) 1,543.00.