TONGA PLANS TO BOOST FOREIGN RESERVES

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NUKU‘ALOFA, Tonga (July 31, 2000 - Radio Tonga)---Tonga Development Bank’s Managing Director Afu‘alo Matoto said the government could implement several initiatives to help boost foreign reserves.

In addition to the Tonga Trust Fund, which the government can withdraw from in emergency situations, the government can borrow from the International Monetary Fund, he said. The bank has never done this before, he pointed out, despite a fund by the IMF to help countries with balance of payment and similar problems.

However, Afu‘alo said there is a risk in taking up loans from such financial institutions. He said the IMF would impose certain conditions that would be too harsh for Tonga to meet.

Afu‘alo adds that the government needs to reduce imports by increasing local production of crops, livestock, fish and manufacturing goods.

He said there is a conflict of interest when the government tries to increase foreign earnings yet at the same time imports heavily and collects taxes and other duties imposed on these goods.

Afu‘alo said the government should restructure its revenue collection methods to suit the kingdom's priorities.

His comments came following reports that Tonga's economic situation will worsen if the official foreign reserves continue to decline in the next few months.

Figures released from the Reserve Bank indicate that during June 2002, the value of the official foreign reserves declined by $2.8 million to $26.2 million.

This represents more than two months of imports and also reflects sales and purchase of foreign exchange by the National Reserve Bank of Tonga.

The foreign reserve was $29 million at the end of May 2000.

Figures show Tonga's foreign reserves were 34.4 million pa‘anga (US$ 20 million) in January and continued to decline to 26.2 million pa‘anga (US$15 million) last month.

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