US$30m devlopment operation will help Tonga recover from dual shocks [1]
Thursday, December 17, 2020 - 10:21. Updated on Thursday, December 17, 2020 - 10:23.
A US$30 million Development Policy Operation to support Tonga’s recovery from the impacts of COVID-19 and Cyclone Harold, was approved by the World Bank’s Board of Executive Directors on 15 December.
Cyclone Harold struck southern Tonga on 8-9 April 2020, soon after the COVID-19 restrictions came into force.
On July 1 Tonga’s National Reserve Bank declared that Tonga’s economy would remain contracted during the current Fiscal Year “due to the negative impacts of Cyclone Harold and the continuing COVID-19 restriction.”
In announcing the support the World Bank stated that Tonga is currently responding to two major shocks to its economy, with COVID-19 having severely impacted Tonga’s tourism, retail and construction sectors – affecting at least 30 percent of the economy. In addition, the country was also hit hard by April’s Category 4 Tropical Cyclone Harold, which affected approximately 27 percent of the population, and is estimated to have caused damages and losses of more than 12 percent of the country’s total Gross Domestic Product (GDP).
In response, the Tonga: Supporting Recovery After Dual Shocks Development Policy Operation [2] will support Tongan businesses, workers and vulnerable households to recover from these dual shocks, with the aim of building a more resilient, sustainable and inclusive economic recovery for Tonga.
The funding also supports social welfare payments from the Tongan Government to more than 4,400 elderly Tongans and more than 1,000 people living with disabilities, and financial support for secondary school students to stay in school.
The Operation also supports businesses to retain their workers through wage subsidies for more than 5,300 workers from over 670 businesses that have been hit by the dual crises.
Other initiatives include the expansion of the Government’s flagship loan schemes for Micro, Small and Medium Enterprises, new legislation that will provide greater clarity for foreign investors regarding contract dispute resolution, and the establishment of a new Housing Sector Resilience Office to strengthen the resilience of housing across the Kingdom.
This Operation is funded through the International Development Association (IDA), the World Bank’s fund for the world’s poorest countries, including resources from a US$25 million allocation from the IDA Crisis Response Window.
The World Bank works in partnership with 12 countries across the Pacific, supporting 83 projects totalling US$1.75 billion in commitments in sectors including agriculture, aviation and transport, climate resilience and adaptation, economic policy, education and employment, energy, fisheries, health, macroeconomic management, rural development, telecommunications and tourism.
Michel Kerf, World Bank Country Director for Papua New Guinea and the Pacific Islands stated “In 2020, we are marking 35 years of partnership with the Kingdom of Tonga, and the scale and scope of this support reflects both the strength of our partnership, and our shared commitment to supporting a sustainable social and economic recovery that aims to ensure no Tongan is left behind.”