- Language: English
- 250 Pages
- Published: September 2013
- Region: Great Britain, United Kingdom
Country Report Tonga
- Published: August 2014
- Region: Tonga
- 17 Pages
- The Economist Intelligence Unit
On August 25th the Ministry of Finance and National Planning announced a new government fund to make low-interest loans available to the private sector.
The ministry said that the new T$13m (nearly US$7m) fund, managed through the Tonga Development Bank, would make credit available at rates of 1-4% to private-sector partners in priority sectors, in line with the announcement in June in the budget for fiscal year 2014/15 (July-June) that the government would be prioritising the development of the private sector as the engine of growth. Financing under the fund is understood to apply to new loans only, rather than the rescheduling of existing loans. Sectors targeted are likely to include tourism and agricultural exporters, as well as construction and renewable energy. 'Aisake Eke, the finance minister, stated that boosting private-sector growth was intended to create more employment opportunities while raising government revenue to facilitate the funding of public service provision.
The low supply of private-sector credit is a major issue for Tonga that exerts a drag on growth. In July a report commissioned by Australia's Department of Foreign Affairs and Trade identified problems accessing credit as a particular problem for exporters. However, the National Reserve Bank of Tonga (NRBT) is cautiously optimistic about an improvement in the availability of credit, pointing to an easing of lending rates in May and June as banks competed to retain performing customers. Yet while bank lending to business rose slightly in May, it fell by 8.4% year on year, reflecting declines in lending to the manufacturing, tourism and construction sectors. In view of continued weak domestic economic activity and the reliance on donor funding highlighted in the budget, the government is likely to have little room to manoeuvre in terms of fiscal support for the economy, constraining the impact of an improvement in credit to the private sector. SHOW LESS READ MORE >
Country Report Tonga
A public boost for private credit
Impact on the forecast