Tonga: Economic Support Program

Sovereign Project | 43152-012

Summary

To maintain fiscal responsibility in the short term, while ensuring social sector expenditure is protected, the government will need to reduce planned expenditure, and continue critical reforms to address underlying structural constraints. If these constraints are not removed, sound fiscal management and increased economic resilience will not be achievable. Possible government responses comprise fiscal, structural, and social policy measures, supported by prudent monetary policy.

The government will need budget support to (i) protect essential social expenditure for segments of society most adversely affected by the crisis, and (ii) advance structural reforms to improve medium-term competitiveness and productivity.

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Project Name Economic Support Program
Project Number 43152-012
Country Tonga
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0185-TON: Economic Support Program
Asian Development Fund US$ 10.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Public sector management - Economic affairs management - Public expenditure and fiscal management - Social protection initiatives
Gender Equity and Mainstreaming
Description

To maintain fiscal responsibility in the short term, while ensuring social sector expenditure is protected, the government will need to reduce planned expenditure, and continue critical reforms to address underlying structural constraints. If these constraints are not removed, sound fiscal management and increased economic resilience will not be achievable. Possible government responses comprise fiscal, structural, and social policy measures, supported by prudent monetary policy.

The government will need budget support to (i) protect essential social expenditure for segments of society most adversely affected by the crisis, and (ii) advance structural reforms to improve medium-term competitiveness and productivity.

Project Rationale and Linkage to Country/Regional Strategy Just as Tonga's economy began to recover from recent domestic shocks the civil service strike in 2005 and civil disturbances in 2006 and the impact of global economic developments such as high oil and food prices in 2008, the prospects for economic growth have come under increasing pressure as a result of the global economic crisis. Recent recorded declines in remittances, a significant slump in trade tax receipts, weak export demand, declining tourism revenues, and weakening of credit flow within domestic banking, show that Tonga is now clearly feeling the impact of the crisis, somewhat sooner and to a greater extent than initially expected. The government revised projected revenue for FY2010 down by 18.6%, to T$140.1 million from T$172.2 million. Government is forecasting a fiscal deficit of 10.3% of gross domestic product (GDP). As a result of this expected decline in revenue, as well as recent poor agriculture and tourism data, the government revised its GDP growth forecast for FY2010 down to 0.4% (from 1.7%).
Impact The impact will have a higher and more inclusive economic growth path.
Project Outcome
Description of Outcome The main outcome will be a timely and effective response to the Global Economic Crisis.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

The program intends to provide quick-disburing budget support to allow the Government to effectively respond to the economic, fiscal and social impacts of the Global Economic Crisis (GEC).

Maintenance of fiscal responsibility.

Structural and governance improvements.

Support the vulnerable through targeted actions.

Communication and ownership of economic and fiscal management initiatives.

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Tonga - national
Safeguard Categories
Environment C
Involuntary Resettlement
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Laisiasa Tora
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Subregional Office in Suva, Fiji
Executing Agencies
Ministry of Finance and National PlanningMr. Aisake Ekeaeke@finance.gov.toMinistry of Finance & Economic Planning P O Box 87 Nuku
Prime Minister's OfficeNaku'alofa
Kingdom of Tonga
Timetable
Concept Clearance 23 Jun 2009
Fact Finding 25 May 2009 to 02 Jun 2009
MRM 29 Jul 2009
Approval 03 Dec 2009
Last Review Mission -
PDS Creation Date 06 Aug 2009
Last PDS Update 27 Oct 2010

Grant 0185-TON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
03 Dec 2009 21 Dec 2009 26 Feb 2010 31 Dec 2010 30 Jun 2011 30 Jun 2011
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 10.00 Cumulative Contract Awards
ADB 10.00 03 Dec 2009 10.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 03 Dec 2009 10.00 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory Satisfactory Satisfactory - Satisfactory -
Title Document Type Document Date
Economic Support Program Progress Reports on Tranche Releases May 2011
Grant Agreement (Special Operations) for Economic Support Program between Kingdom of Tonga and Asian Development Bank dated 21 December 2009 Grant Agreement Dec 2009
Economic Support Program Reports and Recommendations of the President Nov 2009

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation
Title Document Type Document Date
Tonga: Economic Support Program Validations of Project Completion Reports Sep 2014

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