Tonga: 2023 Article IV Consultation-Press Release; and Staff Report
IMF Staff Country Reports, November 3, 2023
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- Tonga: 2023 Article IV Consultation-Press Release; and Staff Report
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Bibliographic details
- Published: November 3, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400258800.002
Overview and main findings
- 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.
- Authorities face a challenging trade-off between supporting reconstruction and managing inflation in the short term.
- Tonga’s high vulnerability to natural disasters complicates efforts to create the fiscal space necessary to finance development spending in the long term.
- Tonga is one of the largest recipients of IMF capacity development resources in the region, and the authorities have shown strong ownership.
Policy recommendations and medium- to long-term strategy
- Once the recovery becomes entrenched, strengthen public finances through a combination of domestic fiscal measures, including:
- Rationalization of tax exemptions.
- Tax administration reform.
- Seek continued donor support to meet development spending needs while reducing the risk of debt distress.
Key themes and topics covered
- Debt sustainability
- Environment and climate resilience
- External debt and public debt
- Inflation and prices
- Monetary policy
- Natural disasters
- IMF capacity development and technical assistance (PFTAC mission)
- GDP compilation capacity
Content in this bundle
- Executive Summary