From the House by Pesi Fonua

How Tonga is going to effectively use the millions received in grants from foreign aid donors to address its struggling economic situation, was the focus of the debate over the 2019-20 National Budget in the Tongan parliament on Wednesday and Thursday 19-20 June. It is clear that a continuing dependence on foreign aid donors remains the source of economic developments.

The Minister of Finance, Hon. Pohiva Tu'i'onetoa ha defined this year's budget as a “half-caste balanced budget”, but has also stressed that it is “a dream”.

According to the Minister for MEIDECCI, Hon. Poasi Tei, the Budget Statement and the National Budget, were distributed to members of the House two months ago, and therefore the House should be able to pass it after debating over during the past two weeks.

Unfortunately, Parliament's Standing Committee on Finance has not tabled its report on the budget to the House, because the Minister of Finance (a member of the Standing Committee) did not attend any of their Budget meetings, and declined their request to attend any of the Standing Committee budget consultation meetings.

MPs appeared to lack a detailed understanding of the content of the 2019-20 National Budget.

Before the House closed on Thursday, 20 June, the Chairman of the Standing Committee, Tevita Lavemaau, said that he would file the committee's report to the House the following day, and it would be tabled into Parliament on Monday, 24 June.

Foreign Aid dependent

The debate over the budget so far, has highlighted discrepancies over how government is budgeting millions of foreign aid money. The revenues that government will collect is considered to be an extensive taxation policy.

Only 51% ($305 million) of the National Budget of $599.27 million pa’anga is financed by government. The remaining 46% ($274.33 million) comes from foreign donors and 3% ($19 million) comes from the sales of Bonds.

Despite the fact that the National Budget statement has not been made public, so far what the public has gathered from the debate in parliament is that the Tongan economy will continue to struggle to reduce our dependence on foreign aid to keep the Tongan economy afloat. The goals are to stabilise the inflation rate, reduce extravagant expenses, increase exports and provide more employment opportunities.

Hungry Dog

People's Representative Samiu Vaipulu, however, expressed his concern that we are relying more and more on foreign aid and budget support. He pointed out that in the past when we wanted to buy a ferry, the MV Hifofua, we bought a ship. Now, we have to look for a donor to give us a ship. The education system is not addressing our needs for skilled workers. Making the situation worse, our skilled workers had left to go fruit picking because of better rewards.

He likened our situation to “a hungry dog, walking around looking for food with its tail between his legs.”

Credit Unions

To find an answer to why the budget is a dream, we only have to listen to the vociferous exchanges in the House.

The Minister of Finance mentioned the formation of a Credit Union, although the details were not clear. Presumably, it will be managed by the Ministry of Finance. He said that $500,000 had been allocated for this project, though the money would remain with the Tonga Development Bank (TDB), but if a project was approved by the Ministry of Labour, then the Ministry of Finance would write out the cheque.

He went on to say that if the Credit Union project with the initial capital input of $500,000 was a success, they would take out $14 million that is with the TDB and invest it in the Credit Union. He stressed that the Underline Account for this project is $61.6 million and was assistance by government to the Informal Sector.

The Minister for Trade, Consumer, Industry, Innovation and Labour, Hon. Dr Tu‘i Uata elaborated that the $61.6m is to help the poor.

Competing with private sector

In an earlier remark by the Minister for Trade, he explained how government was encouraging communities to form Cooperative Societies to set up wholesale and retail stores. He said that government would finance the purchasing of stock for these Cooperative Societies stores to sell.

It appears that the fundamental move in this direction is to compete with privately-owned retail and wholesale outlets.

In addition to the establishment of cooperative stores to be stocked by government, the government will also finance a shipping service to some of the remote islands of Ha'apai to transfer their products to Tongatapu and to stock their stores with imported goods. Most of retial and wholesale outlets thruoghout Tonga are owned by nationalised Tongan Chinese.

Another issue relating to a 15-year agreement that Minister for Trade, Hon. Dr Tu'i Uata signed in Fiji  on the behalf of the Tongan Government with Kacific Broadband Satellites Group to provide higher-speed connectivity for Tonga was raised, but according to the Minister of Police, Hon. Mateni Tapueluelu, Dr Uata is working on an agreement with Kacific but Government "has not formalised the agreement." The need for a Satellite as a back up to our submarine cable network became an issue after Tonga's submarine cable network was disrupted. Hon. Tapueluelu said that there was a human involvement in the brak up and government is taking a legal action on the issue. He said that the damage to cable cost government $2 million.

The House will resume on Monday, possibly without four members who went to New Zealand to watch the Rugby League game between New Zealand, and Mate-Ma‘a-Tonga.

Three members were travel-funded by the House: Lord Tu‘iha‘angana, Siaosi Sovaleni and an [unnamed] Cabinet Minister. The Speaker also went along with two other government officials. The Tongan government donated $2500 for each of the Mate-Ma‘a-Tonga players.

World Bank

Meanwhile, outside of Parliament, in early May the World Bank held a workshop to address the hindrance in the delivery of World Bank funded projects in Tonga. During the workshop they announced the launching of five projects, worth US$75.1 million to be funded by the World Bank.

The projects are:

• Tonga Transport Climate Resilience Project, US$27.8 million;
•  Skills and Employment in Tonga, US$15 million;
•  Tongafish Pathway, US$10 million;
•  Tonga-Pacific Resilience Programme, US$17.3 million;
• Tonga Digital Support Project, US$5 million.