13 Jun 2013

Tonga budget five percent bigger and reliant on donor aid

6:04 pm on 13 June 2013

The Tongan government has announced a budget that is strongly dependent on foreign aid support.

The government is planning to spend five percent more in the coming year compared with last year - about US$202 million.

Matangi Tonga reports that 55 percent of the Budget is set to come from aid donors - particularly Australia, New Zealand, the European Union and the World Bank.

But the finance minister, Lisiate 'Akolo, admits that both the World Bank and the EU withheld commitments last year after Tonga failed to meet certain conditions. Mr Akolo says Tonga this year begins repaying the principal on a loan from China for the rebuilding of Nuku'alofa. He says there's little growth in the economy while the 50 percent fall in remittances has been having a significant effect.

Mr 'Akolo is putting in money to try and stimulate the private sector but former finance minister, Sunia Fili, who is now with the opposition, told Don Wiseman the country has got to make more of its export potential to try and turn the economy around.

SUNIA FILI: We have to look for some kind of new reviews, so we might sacrifice some direct spending by the people to save to pay the debts to China. This is a big challenge for Tonga.

DON WISEMAN: So where would you look for this new income? What would you do?

SF: We're lucky now that we are working with New Zealand and Australia as seasonal workers, as fruit-pickers. We learn a lot of foreign earnings from that. We might focus on what we have, especially the fisheries. I see this Budget here, they do not give any direct funds to help the fisheries increase the export of fish overseas. So the marketing of our agricultural produce is not working. The government has one mission to do that, but it doesn't work so we should diversify more to start with squash pumpkin to China. I think diversify more is the best option for Tonga. We are lucky enough to have cruise ships coming over, plenty coming over. It might help us. It's a good move.

DW: Is there a market in China for squash?

SF: Not really, only in South Korea and Japan. But we are exporting our sea cucumbers to China and we had millions from that. But the ministry of fisheries now are stopping the exporting, harvesting of those sea cucumbers.

DW: Because they've been over-harvested?

SF: Yes. Over-harvested.

DW: What other options or opportunities do you see?

SF: I think we are working from other companies from South Korea and also the United States for mining of the ocean bed for minerals. We've got good reports on that, that we have minerals in our sea beds so that we might good revenues from that. And also we are connected to the cable internet from Fiji. Maybe next month we start with the very fast internet. It might help the economy of Tonga to do private businesses on informations, internet. So it might employ more people in Tonga.