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Remittances drop, economy contracts

NUKU΄ALOFA, Tonga (Matangi Tonga, April 8, 2010) - The Tongan government has reduced its expenditure by 11 percent because of a 28 percent shortfall in revenue collection during the current financial year, Tonga's Minister of Finance, Hon. Afu'alo Matoto told representatives of Tonga's Development Partners at the Fa'onelua Convention Centre this morning, March 8.

In his opening speech to the Government of Tonga's 2010 Annual Forum with Development Partners, the minister told participants that because of the global economic crisis the flow of foreign remittances to Tonga had dropped by nearly 20 percent and the economy is contracting by 0.4 percent during the current fiscal year.

Because of all these financial constraints, he said that the budgets of all government ministries had been cut, excepting that Education and Health had smaller cuts than the others, with a 2 percent cut for the Ministry of Education and a 5.8 percent cut for Ministry of Health.

Afu'alo explained that the small cut in the expenditure of these two Ministries was in order to maintain the social services, and to cater for the needs of the most vulnerable.

Afu'alo said that government ministries, as part of their preparation for the 2010-11 budget, were reviewing their current activities "to ascertain that they concentrate on core essential and priority services. . . .

"Activities of low productivity, low priority and non-essential are to be discontinued. Such activities will be the target for cost-saving and related personnel will be considered for redeployment or retrenchment.

"A leaner, effective and efficient public service will be in line with the reduction in the number of ministries expected under the new democratic government."

The Minister of Finance said that despite Tonga's weak fiscal position the government remains committed to implementing its economic, public sector, and political reform programs. "These reforms will lay the foundation for a sustainable fiscal position for the new government to build on in order to drive the economy successfully going forward."

"I hope that after today's deliberations, everyone will go away with a better understanding of our financial position and possible mechanisms for budgetary support . . ." he said.

After opening Tonga's Annual Development Partners Forum, Hon. Afu'alo together with the Japanese Ambassador to Tonga, His Excellency Mr. Yasuo Takase and the Asian Development Bank's representative to the region, Keith Leonard launched a Support for Economic and Strategic Management Project for Tonga.

The project is estimated to cost US$625,000 and US$500,000 will be financed with a grant from the Japanese Special Fund, which is executed by the Asian Development Bank (ADB). The remaining US$125,000 will be financed by the Tongan government through the provision of counterpart staff, office accommodation, and local communications.

However, Hon. Afu'alo later said he would not be there to oversee and make sure that all these plans would be carried out, and hinting of an imminent retirement said that some one else would be responsible for making sure that all these reforms will take place.

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