ADB is helping Tonga preserve key social sector spending programs that have come under pressure as a result of the global economic crisis. The project will provide budgetary support to the government to maintain spending on basic social services, such as health and education, and continue reforms designed to make the economy more competitive, sustainable, and private sector-driven.
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Concessional ordinary capital resources / Asian Development Fund
Inclusive economic growth
Drivers of Change
Governance and capacity development Private sector development
Sector / Subsector
Public sector management
- Economic affairs management
- Public expenditure and fiscal management
- Social protection initiatives
Gender Equity and Mainstreaming
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%).
The impact will have a higher and more inclusive economic growth path.
Description of Outcome
The main outcome will be a timely and effective response to the Global Economic Crisis.
Progress Toward Outcome
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)
Tonga - national
Summary of Environmental and Social Aspects
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer
Tora, Laisiasa Natakubu
Responsible ADB Department
Responsible ADB Division
Pacific Subregional Office in Suva, Fiji
Ministry of Finance and National Planning Mr. Aisake Eke [email protected] Ministry of Finance & Economic Planning P O Box 87 NukuPrime Minister's Office Naku'alofa Kingdom of Tonga