1 Sep 2005

IMF says Tonga on road to economic recovery

10:23 am on 1 September 2005

The International Monetary Fund has confirmed positive developments in Tonga's economy in report released yesterday.

But it noted that important challenges remained to achieve a higher and sustainable level of economic growth.

Total expenditure for the last 2004/2005 fiscal year was lower than projected on the back of continued efforts to reduce the wage bill and cut capital expenditure.

And given lower than expected grants, total revenue and grants were also below their budget target.

Exports declined on the back of low fish catch and imports rose moderately, but rising private transfers receipts and capital inflows offset this loss and gross international reserves reached a ten year high.

The local currency, the Paaga appreciated slightly, although at a slower pace than the previous year.

GDP growth is projected to have rebounded by 2 and a half percent on the back of recovery in agriculture, tourism and ongoing construction projects.

The IMF says prospects are for a moderate economic recovery in the Kingdom.

But it could be affected by higher world commodity prices, the high cost of oil, a decline in squash and fishing exports, and the introduction of the consumption tax.