The negative impacts of CoViD-19 will lead to a contraction in economic growth for the current fiscal year, the Governor of the National Reserve Bank of Tonga, Dr Sione Ngongo Kioa stated on 5 May, as domestic activities have already shown a slowdown.

Although agricultural export volumes rose in February 2020, the proceeds changed little over the month. He pointed out that partial indicators signaled a downturn in the industry sector, while the tertiary sector started to show impacts of CoViD-19 on tourism, travel, trade and employment.

“Remittance is also slowing down as more of our remittance source countries go into lockdowns.”

“Inflation rose by 0.3% over the month as domestic prices increased by 0.7%, while imported prices remained stable.

“Annual Inflation recorded an increase of 0.8% over the month as domestic prices increased by 0.7% while imported prices remained stable.

“Annual Inflation recorded an increase of 0.8% compared to 0.6% in January 2020 and 3.2% in February 2019”.

Higher imported prices resulted in higher prices for food, transport and alocholic beverages.

The Reserve Bank projects that the negative impacts of COVID-19 on the Tongan economy will eventuate to a contraction in economic growth for the current fiscal year.

However, Tonga’s Foreign Reserves are expected to remain at sufficient levels above three months minimum threshold of imports cover. Inflation is also expected to increase but still remain below the 5% reference rate.

He was confident that Tonga’s banking system is still sound with high liquidity.

“The Reserve Bank continues to be vigilant by closely monitoring its economic and financial indicators, and stands ready to adjust its monetary policy settings if needed to maintain internal and external stability and support macroeconomic growth.”

On 1 May 2020 the National Reserve Bank of Tonga's Board of Directors approved to maintain its current monetary policy measures, "to encourage utilization of the excess liquidity in the banking system, through further lending to growth sectors and to support the economy from the impacts of COVID-19.

The NRBT's Monetary Policy Measures:

1. maintain the monetary policy rate at 0% (zero interest rate policy);
2. maintain the minimum loans/deposit ratio of 80%;
3. maintain the Statutory Reserve Deposit ratio at 10%, and
4. maintain the inflation reference rate at 5%.
5. Monitor the commercial banks liquidity and adjust the SRD ratio if needed.
6. Monitoring the commercial banks’ capital reserves and adjust further when required.
7. Ease the exchange control requirements when required.
8. Continue to issue Government Bonds.
9. Maintain clear channels of effective communications with the financial instutions for adequate preparedness.
10. Continue to be transparent and raise awareness of its monetary policy decisions through press releases to the public.
11. Closely monitor the impacts of the pandemic in the financial system for early detection of any signs of vulnerability.
12. Continue to ensure both commercial banks and non-bank financial institutions adheres to all Government declarations regarding CoViD-19 in the workplace while delivering essential financial services to the public.