Tonga: 2023 Article IV Consultation-Press Release; and Staff Report

International Monetary Fund

No 2023/361, IMF Staff Country Reports from International Monetary Fund

Abstract: The 2023 Article IV Consultation discusses that The Tongan economy is performing strongly, underpinned by resilient remittance inflows and major reconstruction activities following the Hunga Tonga–Hunga Haʻapai volcanic eruption in January 2022. The authorities are confronting a challenging trade-off between supporting reconstruction and managing inflation in the short term. In the long term, Tonga’s high vulnerability to natural disasters complicates its efforts to create the fiscal space necessary to finance development spending. Tonga is one of the largest recipients of IMF capacity development resources in the region, and the authorities have shown strong ownership. In the medium to long term, once the recovery becomes entrenched, Tonga should strengthen the public finances through a combination of domestic fiscal measures―including rationalization of tax exemptions and tax administration reform―and by seeking continued donor support, which is essential to meet Tonga’s development spending needs while reducing the risk of debt distress.

Keywords: climate resilience; development spending needs; inflation pressure; PFTAC mission; development objective; development goal; GDP compilation capacity; Inflation; Natural disasters; Debt sustainability; Australia and New Zealand; Global; Pacific Islands (search for similar items in EconPapers)
Pages: 74
Date: 2023-11-03
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