ADB to contribute $5m grant to support Tonga’s Post-COVID-19 economic recovery

The Economic Recovery Support Program will help the government progress ongoing reforms to foster Tonga’s economic recovery from the downturn caused by the coronavirus disease (COVID-19) pandemic.

The Asian Development Bank (ADB) will contribute a $5 million grant to a program that will help restore and accelerate inclusive, private sector-led economic growth in Tonga.

The Economic Recovery Support Program will help the government progress ongoing reforms to foster Tonga’s economic recovery from the downturn caused by the coronavirus disease (COVID-19) pandemic. The program is being financed in collaboration with the Government of Australia, the Government of New Zealand, and the World Bank.

“While Tonga has had a relatively low number of COVID-19 cases, border closures and reduced economic activity—as well as Tropical Cyclone Harold—have deeply affected the economy, and put at risk hard-won gains in poverty reduction,” said ADB Principal Economist for the Pacific Ashish Narain. “This program will allow the Government of Tonga to restore economic growth through enhancing macroeconomic stability, increasing women’s labour force participation, and ensuring a more enabling environment to attract foreign and domestic investment.”  

Despite declining revenues, the government increased health expenditure in fiscal year (FY) 2021 to prepare for the pandemic and funded support for vulnerable people and a stimulus package for key economic sectors in 2021. The grant announced today will help Tonga meet its development financing needs as government expenditure is expected to further pick up in FY2022 to continue to build resilience in the economy.

Reforms supported through the program will help enable Tonga to manage its external public debt, redirect public spending towards development needs, and increase impact through improved public financial management.

In addition, private sector-led growth will be promoted through an improved international commercial arbitration framework, enhanced access to finance and supervision of non-bank financial institutions, and an increased number of higher-skilled workers ready for deployment.  

The program builds on reforms ADB has supported in Tonga since 2009 to strengthen public financial management and build macroeconomic resilience.