The Tongan Prime Minister Hon Feleti Sevele this morning, announced the set up of a new Private Sector Reconstruction Facility, PSRF, worth $16 million pa'anga.

Funded by the Australian and New Zealand Government, its purpose is to provide low cost rebuilding loans to those businesses that were directly affected by the 16/11 riots.

In a statement from the Australian High Commissioner it said that the PSRF would provide liquidity to enable Banks to lend to eligible businesses with rebuilding and reconstruction projects.

Instead of the local lending rate of 13% the PSRF would loan to eligible businesses at 5% interest. This is made possible by the injection of donor funds into liquidity of $16 million (AUD $10 million) that will be on loan from the Government of Tonga and the National Reserve Bank of Tonga to local banks at no cost.

PSRF is a loan, not a grant, and businesses have to apply through their banks and they will approve loans according to its normal criteria.

Prime Minister Feleti Sevele said in August that he approached the Australian and New Zealand Government to get support in starting the reconstruction of the Central Business District.

He added that in a recent analysis by NZAID and AusAID it determined there was sufficient liquidity in the banking sector to support daily needs of the economy, but it was not sufficient to support large-scale reconstruction.

Donors then committed themselves to the set up of this facility that will provide low cost rebuilding loans to directly affected or destroyed businesses, he said.

New Zealand and Australia is contributing $5 million each to this facility. This money is additional to Australia's current aid program of AUD$15.7 million and NZ's aid program of NZ$11 million to Tonga.