Tonga’s official Foreign Reserves had risen slightly by $0.2m to $489.5m (equivalent to 7.8 months of imports cover), while annually, Foreign Reserves increased by $20.90m due to higher receipts of budget support, grants, and project funds from development partners, the Reserve Bank of Tonga stated on 21 January.

Tonga’s level of Foreign Reserves is projected to remain at a comfortable level, and inflation is expected to remain below the reference rate of 5%. “The banking system is also anticipated to continue to remain sound.”

The banks’ total loans to deposit ratio rose from 79.1% to 81.2% over November 2019, reflecting loans growing while deposit fell. This is above the 80% minimum loan to deposit ratio. However, the liquidity in the banking system still remains relativly high, indicating that existing capacity is still available for further lending.

The Reserve Bank said it would continue to encourage the utilization of the excess liquidity in the banking system to increase lending, support domestic economic activities, and strengthen the monetary policy transmission mechanism.