World Bank To Support Economic Recovery in Tonga

World Bank Board Approves Us $9 Million Grant For Tonga

Washington D.C., November 22, 2011 --- The World Bank Board of Directors today approved a $US 9 million grant to strengthen the economy of Tonga following the global economic crisis and help protect 30,000 people – more than a quarter of the population - from poverty.

Over the last four years Tonga has been affected by high food and fuel prices, major natural disasters and the global economic crisis, which hit the economy hard as a result of reductions in tourists, taxes and remittances from overseas workers. Previously amounting to a third of GDP, remittances are a lifeline for families and communities in Tonga. They declined by more than 25 percent following the global economic crisis.

Since 2001 poverty has risen by approximately one third, leaving one in five people unable to afford basics like food, electricity and medicines.

Through the Tonga Economic Recovery Operation, the World Bank is supporting the Government to make the economy stronger, make debt more sustainable and build resilience to shocks. It will also help design a community-led scheme for social protection to reduce poverty. Set to benefit 30,000 people, this will provide temporary employment and incomes for men and women in vulnerable communities across the country.

“It is a critical but also a challenging time for development in Tonga, and the World Bank is committed to ensuring that global shocks do not stifle growth and undermine Tonga’s recent development achievements,” said Ferid Belhaj, Country Director for the World Bank in the Pacific Islands. “The Bank and other partners are reassured by the Government’s pledge to maintain sound fiscal policy and debt management, and this Operation will help the country build back stronger - with a more vibrant, resilient economy and more secure communities.”

Through a number of public works activities, the social protection scheme will be led by communities, develop local skills and provide much needed incomes for workers and their families until the economy recovers. The program will also assist the government in implementing formal safety nets, so they will be better placed to reach vulnerable people if another crisis occurs.

The World Bank provides assistance to Tonga in the form of grants, because Tonga is at high risk of debt distress. The Tonga Economic Recovery Operation will help the country achieve fiscal stability and tackle its debt situation. It will also build on ongoing development initiatives and reforms, which include strengthening public financial management and fiscal policy, ensuring greater transparency, and promoting affordable and sustainable energy.

Over recent years the Government has achieved a number of successes in its reform and development agenda. A recent report from the World Bank and the International Finance Corporation found significant improvements in the ease of doing business in Tonga, ranking the country 58th out of 183 economies worldwide and first of all countries in the Pacific.
For more information about the World Bank in the Pacific, please visit www.worldbank.org/pi

ENDS