By Katalina Siasau

The Prime Minister said he does not have concerns that major projects in the 2025-26 budget could potentially increase the national debt and create a further burden.

"The public debt is currently declining and that there are no plans to take on any new debt from overseas," Hon. Dr 'Aisake Eke, told a media briefing held at the St George Gov't Building in Nuku'alofa yesterday, 6 June.

$428.9m debt

The budget estimate projects the total national debt to be $428.9 million as of 30 June, a decrease of $14.5 million, or 3%, compared to the total public debt from 30 June, 2024.

It is estimated that the total national debt at 30 June, represents 34% of the country's GDP.

Around 84% of total public debt is denominated in foreign currencies, which 47% is from Special Drawing Rights, an international reserve asset created by the International Monetary Fund. "This dominance of external debt holdings leaves Tonga vulnerable to international currency fluctuations," stated the 2025-26 budget estimate.

The 2025-26 budget estimate states 84% of Tonga's total public debt is denominated in foreign currencies, which 47% is from Special Drawing Rights an international reserve asset from the International Monetary Fund (IMF). The budget estimate notes that, "This dominance of external debt holdings leaves Tonga vulnerable to international currency fluctuations."

Meanwhile, the domestic debt represents 16% of the total public debt.

In the budget estimate, the debt management is estimated at $68.4 million, which makes up 6.9% of the total expenditure for 2025-26.

Local currency bonds

The proposed budget for the fiscal year 2025-26, amounting to $992.8 million, the biggest budget of the country, was presented to Parliament this week, on 3 June.

There is an anticipated budget deficit of $29.1 million, with estimated recurrent expenditure exceeding the recurrent revenue for 2025/26.

This deficit is primarily due to the financing of significant infrastructure projects and will be offset by a Government issue of $30 million in local currency bonds with 3% interest. The PM noted that the bonds issue would support private sector and expand access to capital.

Budget debate

Following the House discussions on Tuesday and Wednesday this week, the budget has been submitted to the Finance and Public Accounts Committee for a more detailed review of the financial estimates.

Parliamentary proceedings are scheduled to resume on 16 June, when the Finance & Public Accounts Committee will present its report to the House, and further deliberations on the budget will take place.