Tonga’s inflation rate remains highest in Pacific Is. [1]
Tuesday, April 30, 2019 - 12:31. Updated on Tuesday, April 30, 2019 - 12:46.
By Pesi Fonua
Although Tonga’s inflation rate dropped last year, it remains the highest inflation rate of the 14 Pacific Islands members of the Asian Development Bank.
Tonga’s Inflation Rate dropped from 7.4% in 2017 to 5.3% in 2018 and is forecast to remain at 5.3% for 2019 and 2020.
Tonga in 2019 falls behind Papua New Guinea at 4.2% and Fiji at 3.7%.
However, even though the inflation figures were spelled out in the Asian Development Outlook 2019, to provide a comprehensive analysis of the macroeconomic issues in Asia and the Pacific, there was confusion over the figure in Tonga.
At a press conference in Nuku'alofa yesterday April 29, the Governor of Tonga’s National Reserve Bank, Dr Ngongo Kioa believed that Tonga’s inflation figure was only 2%.
He attended the press conference with the Chief Economist of the Asian Development Bank, Yasuyuki Sawada who presented the 2019 Asian Development Outlook Report.
Mr Sawada clarified the situation by pointing out that even though Tonga’s inflation rate is in fact 5.3%, but “it is not too bad”.
Fiji meeting
Mr Sawada, who is a former professor at the University of Tokyo’s Graduate School of Economics, presented Tonga Economic Update to civil servants, the media and members of the public, at the National Reserve Bank Building. He is visiting Tonga ahead of the ADB's 52nd annual meeting to be held in Fiji this week.
According to Mr Sawada, threats to the economies of the Pacific Islands remain to be the prolonged confrontation between the United States of America and the People’s Republic of China.
The other major concern for the Pacific is the devastating impact of natural disasters. But Mr Sawada gave an example of how the ADB is ready to respond in the case of a natural disaster. He said that the ADB’s $6 million contingency financing loan to Tonga after Cyclone Gita struck in February 2018, took just three days to disburse.
On a different issue, when questioned about the working relations between the Asian Development Bank and the new Asian Infrastructure Investment Bank (AIIB) that was established in 2016, he explained a shared vision.
Most of the members of the ADB, including Tonga are also members of the AIIB.
Mr Sawada said that the ADB and the AIIB signed a Memorandum of Understanding three years ago. He said that there is an understanding between the two banks that to build the infrastructure of Asia to the status that they envisaged, needs an annual investment on infrastructure of about $1.7 trillion. At the moment what can be offered is only $700 million annually.
The AIIB is financing infrastructural projects in Bangledash, Pakistan, India and Georgia.