A $60 million pa'anga economic and social stimulus package to counter the impact of CoViD-19 was announced by the Tongan government today, 2 April.

The Prime Minister Hon. Dr Pohiva Tu’i’onetoa, and Minister for Finance, Hon. Tevita Lavemau explained that the package will provide short-term financial assistance for all sectors of the Tongan economy. This includes tourism, aviation, agriculture, construction, manufacturing, transport, security, law and order, among others.

The health sector will also receive funding.

There will be an increase in the welfare scheme for the elderly, those with disabilities and poor households. The elderly and disability allowances of $100 per person for COVID 19 plus March and April monthly allowances will be paid out next week.

Employees who have lost their jobs due to the COVID19 impact will receive an allowance after completing forms at the Ministry of Finance, starting next week. 

The government has also paid overseas students' allowances to assist with rent and food.

The Ministry of Revenue and Customs will provide tax and duty relief during CoViD-19. This includes a delay in all taxes until before 30 June 2020, except for PAYE.

Funding clusters

Funding has been allocated to nine cluster systems to ensure all impacted sectors are covered.

The clusters include:

• Economic and social recovery - $22.4m
• Education - $3.8m
• Emergency Telecommunications - $0.3m
• Essential services – $1m
• Food Security and Livelihood - $3.2m
• Health, Nutrition, Water Sanitation Hygiene (WASH) - $22.5m
• Logistics & Coordination - $1.6m
• Safety and Protection - $1.3m
• Shelter Cluster - $4m

The biggest funding (over 30 percent) will go toward the Health, Nutrition, Water Sanitation Hygiene (WASH) cluster. Funds will target preparedness and protection ($11.7m)– including water tanks, medical supplies ($6m), and implementation of the Ministry of Health Pandemic Plan ($4.8m).

The second biggest funding will go towards the economic and social recovery cluster. It will target affected businesses ($16.4m), affected employees ($5m), and community livelihood ($1m).

Funding for the package is made up of Recurrent $9.7m, National Emergency Fund $3.8m, Development Funds $11.6m, and Budget Support (cash) $34.9m.

Other assistance

Other forms of assistance include a contribution from the National Reserve Bank of Tonga of $5m, and deferment of loan and interest repayments on a case by case basis by Tonga Development Bank and commercial banks (BSP, ANZ, MBf).

There is also a 3-month moratorium on government development loans and TC Gita recovery loan fund.

Communications, electricity and other utilities assistance had also been provided by Tonga Communication Cooperation, Digicel Ltd, Tonga Power Ltd, Tonga Water Board, Waste Authority Ltd, Tonga Cable Ltd, and others.

Impact on economy

According to the government, an initial assessment of the overall impact of COVID-19 on the Tongan economy estimates gross domestic product (GDP) loss of over $60m pa’anga for the FY2020.

If the pandemic continues without stopping in the first two quarters of FY2021, GDP loss of over $200m is forecast.

As a result, domestic revenue is expected to be reduced by $35m which means a fiscal deficit in FY2020. And $40m loss of revenue stream for FY2021, with a projected fiscal deficit of $54m.