Tonga’s Foreign Exchange Control Act 2018, that was enacted by His Majesty Tupou VI on 21 June 2018, became effective on 1 November after the National Reserve Bank of Tonga released its Exchange Control Directive.

The Exchange Control Directive ECD outline how banks and Foreign Exchange Dealers operate within the foreign exchange market.

Among some of the demands that were highlighted in the ECD are:

- Residents are required to declare the type of offshore investment and agree to take reasonable steps to realise this investment and repatriate it back to their nominated bank account in Tonga if the Foreign Reserves fall to critical levels of 2 months equivalent of imports of goods and services.

- The enforcement of the return of offshore investments will only be enforced should the foreign reserves fall to critical levels, equivalent of 2 months equivalent of imports of goods and services. The Foreign Reserves are at very comfortable level at above seven months of imports.

- In response to concerns in terms of references to residents holding and owning Foreign Exchange and immovable properties outside of Tonga, the NRBT Board of Directors on October 2018 approved amendments to remove this requirement from the Act but has yet to be implemented.

The ECD lists all the documentary requirements that Banks and Foreign Exchange Dealers are required to sight, stamp and retain a copy for all foreign exchange dealings that have been presented and paid.

The ECD also lists the limit for each type of payment that Banks and Foreign Exchange Dealers can approve:

• Banks and Foreign Exchange Dealers can process payments of up to T$100,000 but any payments above this threshold will be subject to the NRBT’s prior approval. To expedite the payment of imports, import payments are permitted based on invoices, the custom import entry forms can be provided after the goods have arrived in Tonga.

• For members of the public travelling overseas, the removal of Tongan Pa’anga cash exceeding TOP$10,000 or cash in the currency of any other country or countries in any combination that exceeds the value of TOP$10,000 requires the approval of the NRBT.

• The opening of all foreign currency accounts requires the prior approval of the Reserve Bank except for accounts of Foreign Missions and Regional or International organisations which are fully delegated to the banks. Applicants are to submit projected inflows and outflows from the accounts.

• Banks and Foreign Exchange Dealers can approve applications for transferring of funds for offshore investment by a resident from funds that are sourced locally, up to a delegated limit of TOP$100,000 per application.

• Residents are required to declare the type of offshore investment and agree to take reasonable steps to realise this investment and repatriate it back to their nominated bank account in Tonga if the Foreign Reserves fall to critical levels of two months equivalent of imports of goods and services.

• The enforcement of the return of offshore investments will only be enforced should the foreign reserves fall to critical levels, equivalent of two months equivalent of imports of goods and services. 

• Exporters are required to declare its exports and agree to repatriate back at least 60% of its export proceeds, to the nominated bank account in Tonga within six months from the date of exports. For operational purposes, exporters are permitted to retain not more than 40% of the total export proceeds in a foreign currency account in Tonga or overseas. The purpose of this requirement is to ensure the foreign exchange derived from the export of goods from Tonga can assist with building of our foreign reserves in order to meet the country’s foreign exchange obligations.

• The NRBT reserves the right to conduct due diligence checks on applicants, require further information, and may not approve any application that does not comply with its Anti-money Laundering and Counter Terrorist Financing requirements.