From Matangi Tonga Magazine Vol. 18, no. 2, August 2003.

The Tonga Government’s Budget for 2003-04 of $156.2 million is the highest ever, and it is $37.5 million more than last year’s $118.7 million budget.

This year’s Big Budget carries the hope of most Tongans that it will make a positive impact on the stagnating state of the economy. Tongans want to see a lower inflation rate, currently quoted to be about 11.9%; an increase in the Foreign Reserve, which has remained at around $37.6 million during the past few months; and a recovery in the value of the pa‘anga, which continues its slippery three year decline against most currencies, a period in which it has lost nearly 54% value against the dollar of New Zealand, its biggest trading partner.

The total amount to be appropriated to all government Ministries during the 2003-04 financial year will amount to $146,595,446. The top seven ministries with the biggest votes in this year’s budget are:

Ministry of Finance    $40,287,991

Ministry of Health    $20,658,784

Ministry of Education    $18,986,038

Ministry of Works    $11,272,377

Ministry of Foreign Affairs    $5,647,505

Prime Minister’s Office    $4,320,651

Ministry of Police    $4,130,278

The government’s direct financial assistance to some of its commercial enterprises during the coming financial year will amount to over $2.5 million including:

Royal Tongan Airlines (Niua’s subsidy)    $100,000

Royal Tongan Airlines (budget assistance)    $1,100,000

Shipping Corporation of Polynesia Ltd. (Niua’s Subsidy)    $132,000

Tonga Development Bank (Niuas)    $40,000

Tonga Broadcasting Commission    $500,000

Tonga Corporation    $300,000

Post Office    $500,000

The 31% increase in this year’s $156.266,010 budget is translated to mean a big increase in government spending, a strategy that many people consider to be contrary to the objective of the Economic and the Public Sector Reform program that was implemented by government last year. Allocation for salaries alone has gone up by $4 million to $52 million compared with $48 million during the last financial year. Allocation for overseas travelling this year amounts to $2.9 million, with another $900,000 for new vehicles.

In addition the other allocations that government is committed to make during the new financial year include $2 million for a Redundancy Package, $3.2 million to non-financial public enterprises, and a $5.4 million contingency Fund.

The Ministry of Finance has the largest budgetry allocation this year, partly because the funding for the economic reform program requiring consultancy and drafting of new bills is included.

Revenue

To finance this year’s budget the only new revenue measures introduced are a 100% hike in the duty of imported cigarettes to 700%, and a 50% hike in the duty of spirits, to between 300% and 450% which is expected to bring in $1.5 million. To balance the budget the Minister will rely on the efficient collection of revenue by the Revenue Service, and the anticipated growth of both the Tongan and overseas economies.

Domestic sources of revenue will include dividends from, Leiola Duty Free $500,000, the Ports Authority $100,000, Tonga Communications Corporation $1 million, and Westpac Bank of Tonga $2 million.

It is yet to be seen if the 2003-04 budget will stop what appears to be the free falling of the Tongan economy, but the Minister of Finance offered a sense of hope with his forecast that the Tongan economy would grow by 2.6% during the coming financial year more than the 1.9% growth that it made during the 2002-03 financial year.

Royal Tongan

Prior to the tabling of the 2003-04 budget the House passed a Supplementary Budget for the 2002-03 financial year of $1.1 million for government to complete the purchasing of its $20 million shares in the Royal Tongan Airlines. Government is the sole shareholder in RTA. The House also approved for government to borrow $22 million from the World Bank for construction of a new hospital, starting next year and to be completed by 2009.

This year’s budget appears to put on hold the Tax Reform program that had been presented to the public and was anticipated to be introduced in this coming financial year, and Tonga’s participation in PICTA, and Tonga’s accession to the WTO, which was proposed to take place before the end of the year.

Travel cuts

The Minister of Finance, Hon. Siosiua ‘Utoikamanu was about to push his record budget for the 2003-04 financial year through the House without any opposition from members, but five days before the end of June, Hon. Tu‘ivakano, the Tongatapu no. 1 Nobles Representative moved for a $1.6 million cut in government expenditure.

He moved two motions for a 30 per cent cut in all government overseas travel expenses and for Government not to buy any new vehicles during the 2003-04 financial year, but exempting from this Budget cut the Ministry of Health, the Ministry of Police and the Prison.

There was some fierce debate over the motion for a 30 per cent cut across the board on overseas travelling. The Prime Minister, Prince ‘Ulukalala warned the House of the impact of such a cut on government’s travel plans to represent Tonga on important meetings where Tonga’s views would only be considered if they are represented.

In the end there was a strong feeling among the People’s and the Noble’s Representatives that the public, which bears the crunch of the current stagnating state of the economy, should know that the House cares. The House passed both of the motions for cuts, the 30 per cent travel cut by a 13-12 vote, and for a cut in new vehicles by a vote of 14-10.

The government estimated total overseas travelling expenses amounted to $2.9 million and the four government departments that spend more than half of this total amount are, the Palace Office $590,000, the Legislative Assembly $290,000, Foreign Affairs $300,000  and the Prime Minister’s office $200,000.