ADB Funds Program to Boost Fiscal Resilience, Business Climate in Tonga

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The FINANCIAL — The Asian Development Bank (ADB) has approved a $2.75 million loan and a $2.25 million grant to help Tonga strengthen its long-term economic growth prospects as well as support and develop the country’s capacity to respond to external economic shocks.

The loan and grant assistance will fund the second of three subprograms of the ADB-supported Building Macroeconomic Resilience Program for Tonga. The full program is set to run from 2016 to 2018 and builds on previous policy-based support from ADB and other development partners, according to ADB.

“The government of Tonga is undertaking important policy reforms to strengthen public financial management, promote healthy lifestyles, and improve the performance of state-owned enterprises,” said Ananya Basu, Principal Economist from ADB’s Pacific Department. “The ADB program will help further improve Tonga’s fiscal position and business environment.”

Policy actions supported by subprogram two include the development of fiscal targets to help the government’s medium-term planning, strengthening of tax revenue mobilization, and the introduction of a new public service salary structure in line with fiscal targets. Business environment reforms focus on public enterprise governance improvements and foreign investment legislation to make it easier to invest in Tonga.

The ADB assistance is policy-based, meaning the funds are released as budget support once policy actions outlined in the program are successfully completed. It is part of a coordinated effort between various development partners. Parallel financing is being provided by the European Union, the World Bank, and the Governments of Australia and New Zealand.

ADB has been working with the Government of Tonga since 1972. It has approved 17 loans and 17 grants totaling $157.3 million from the Asian Development Fund, and 66 technical assistance projects worth $22.42 million.

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