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Pacific Subregional Office (SPSO)

The SPSO serves as the focal point of ADB for programming, processing, and administering assistance in the Cook Islands, Fiji, Kiribati, Niue, Samoa, Tonga, and Tuvalu.

ADB's Work in Tonga

ADB Membership

Joined 1972

Shareholding and Voting Power

Number of shares held:
426 (0.004% oof total shares)

Votes:
40,123 (0.302% of total membership, 7.143% of total regional membership)

Overall capital subscription:
$5.92 million

Paid-in capital subscription:
$0.29 million

Tonga faces development challenges typical of many small island economies. These challenges include geographic isolation, limited human and financial resources, a small domestic market, high costs of doing business, and inefficient delivery of services. The country’s economy is narrowly based and depends heavily on remittances and external assistance to supplement domestic revenue. Tonga’s mediumterm development requires continued implementation of structural reforms to improve productivity, remove bottlenecks to growth, develop disaster resilience, climate-proof infrastructure, and strengthen macroeconomic foundations.

Early morning fishing in Tonga.

(ADB) began working with Tonga in 1972 and has since committed $70.2 million in loans, $121.2 million in grants, and $23.3 million in technical assistance for the country.

Since 2008, ADB has significantly scaled up both its financial and technical support to Tonga, committing $87.7 million in grants and concessional loans, mobilizing $44.9 million in cofinancing, and providing about $8 million in technical assistance.

Cumulative loan and grant disbursements to Tonga amount to $120 million. These were financed by concessional ordinary capital resources, the Asian Development Fund, and other special funds.

Since 2008, ADB has committed $87.7 million in grants and concessional loans, mobilizing $44.9 million in cofinancing, and providing about $8 million in technical assistance. Cumulative loan and grant disbursements to Tonga amount to $120 million.


ADB-Supported Projects and Programs

ADB’s active program in Tonga covers a range of sectors including renewable energy, urban development, climate resilience, disaster recovery, and regional health.

The Outer Island Renewable Energy Project (with cofinancing from the governments of Australia and Denmark, and the European Union) is helping to reduce dependence on imported fossil fuel for power generation on Tonga’s more remote islands. It is increasing consumer access to solar power and improving energy affordability. In 2018, ADB committed additional financing to extend the benefits of the project to the most remote outer islands of Haˇapai and Niuatoputapu.

A new solar power supply financed by ADB's Asian Development Fund, Australia, and donors in Europe is boosting the private sector and ushering in a clean energy revolution in Tonga.

The Nukuˇalofa Urban Development Sector Project (with cofinancing from the Government of Australia) received additional financing in 2017 and is helping establish a municipal government in Nukuˇalofa as well as delivering high-priority urban infrastructure for the city of around 34,000 people.

The Climate Resilience Sector Project (financed by the Strategic Climate Fund) will assist government efforts to implement low-cost investments to combat climate change, support community adaptation, and mainstream climate change considerations into planning processes.

In December 2017, ADB approved a $6 million policy-based loan and grant under the regional Pacific Disaster Resilience Program as contingent financing for disaster response, early recovery, and reconstruction activity in Tonga. In addition, a Cyclone Gita Recovery Project of $6.8 million will support the reconstruction and climate- and disaster-proofing of the Nukuˇalofa electricity network. A new $6 million recovery program will be prepared in 2019 to provide contingent financing for Tonga in the event of another natural disaster

The Cyclone Gita Recovery Project reconstruct and climate- and disaster-proof the Nuku'alofa electricity network that was damaged by Tropical Cyclone Gita in February 2018.

In health, the Regional Vaccine Project will provide effective coverage in Tonga through the introduction of new vaccines for human papillomavirus, pneumococcal virus, and rotavirus. The Tonga health system will be strengthened to support the introduction of the new vaccines and promotional strategies on the importance of vaccination will be implemented.

ADB is also active in joint policy reform dialogue with the government and other development partners in Tonga. This process is linked to budget support disbursements through ADB’s policybased lending modality.

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2018 amounted to $3.14 billion for 32 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2018, ADB mobilized $3.17 billion of long-term cofinancing and $3.99 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $12.7 billion as of 31 December 2018.

Cofinancing

ADB began cofinancing operations in Tonga in 1974. Since then, cumulative direct value-added official cofinancing commitments for Tonga have amounted to $80.5 million for eight investment projects and $3.63 million for seven technical assistance projects.

In 2018, Tonga received $3.38 million in grant cofinancing from the Government of Australia and Global Environment Facility for the Outer Island Renewable Energy.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

Tonga’s economy is undermined by natural constraints (small, widely dispersed islands that are remote from developed nations), exposure to external shocks (natural and economic), and internal bottlenecks (weak institutional capacity and ongoing emigration). The country’s relatively meager business environment also limits the availability of local contractors and consultants to implement ADBfinanced activities.

Tonga has the second-highest disaster risk in the world and this can hamper development operations. Three tropical cyclones in just 5 years have caused severe damage to the islands of Tongatapu and ‘Eua, the Vava’u island group, and the Haˇapai island group— affecting almost the entire population.

To improve Tonga’s climate and disaster resilience, energy efficiency, project implementation, budget management, and urban planning, ADB (in collaboration with the World Bank) is providing technical assistance to establish a central project support unit at the country’s Ministry of Finance and National Planning. Through the Pacific Private Sector Development Initiative, ADB is working with the government to reform state-owned enterprises, improve Tonga’s business environment, support small and medium-sized enterprises, and broaden access to finance.

Future Directions

ADB’s Pacific Approach, 2016– 2020, which serves as the country partnership strategy for Tonga, has at its core the promotion of sustainable, inclusive economic growth and social development.

ADB is promoting inclusive economic growth and social development.

ADB has approved scaling up country allocations for small island states, including Tonga, for 2019 and 2020. The bank’s operational program for 2019–2021 has a significant focus on infrastructure that will reduce the costs of key services and improve overall productivity, with major investments planned in energy, information and communication technology, transport, and water and urban infrastructure. These investments are in line with the Tonga Strategic Development Framework II, 2015–2025 and the government’s National Infrastructure Investment Plan, 2013–2023.

This article was originally published in the ADB and Tonga Fact Sheet. Updated yearly, this ADB Fact Sheet provides social and economic indicators on Indonesia as well as concise information on ADB's operations in the country and contact information.

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