By Judith Ugwumadu | 27 February 2015

The International Monetary Fund has said it will continue to support public financial management reforms in Tonga that form part of the country’s development plans. 

Following an Article IV mission, the fund said the country faced a medium-term challenge to build a sound fiscal position that would bolster the country’s resilience to shock. 

The report, led by Yasuhisa Omjima, welcomed the government’s proposals for tax reforms and its adoption of a roadmap for PFM as part of its Tonga Strategic Development Framework.

However, it added these efforts should be complemented by setting clear medium-term fiscal targets, such as achieving a primary surplus. It also urged the government to closely control the spending programme for the 2019 South Pacific Games, which are being held in the country.

Omjima said raising Tonga’s growth potential remained a key challenge, with the updated development framework also key to making growth more sustainable and inclusive.

‘Therefore, the mission underscores the importance of structural reforms to the business climate to support private sector development and raise growth prospects, including through initiatives such as revising the Foreign Investment Act,’ he added.

‘The IMF will continue to support Tonga’s reform efforts by providing technical assistance in the areas of public financial management, banking regulation and supervision, and macroeconomic statistics.’

The fund also forecast that economic growth is expected to average 2%-3% in 2014/15 to 2019/20, boosted by spending around the South Pacific Games.