The International Monetary Fund (IMF) has praised Tonga’s economic recovery but warned of significant medium-term challenges following its annual Article IV consultation with the Kingdom of Tonga on November 6.
Economic growth in Tonga for FY2024 (July 2023–June 2024) was estimated at 1.8%, driven by remittances, tourism recovery, and construction. However, agricultural output declined, and labor shortages hindered a stronger rebound. Inflation eased significantly, dropping to 3% in July 2024 from a peak of 14.1% in September 2022, aided by declining global commodity prices.
The IMF projected real GDP growth to reach 2.4% in FY2025, fueled by public investment and agricultural recovery. However, Tonga’s long-term growth is expected to average 1.2%, constrained by climate risks, emigration, and geographical challenges.
“Directors underscored the importance of steadfast policy implementation and reforms to pave the way for continued macroeconomic stability and sustained growth,” the IMF stated.
Recommendations included fiscal consolidation, tax reform, public spending efficiency, and debt reduction to address Tonga’s high debt risk. The IMF also emphasized strengthening banking supervision, combating corruption, and advancing digitalization to enhance resilience and financial inclusion.
Directors welcomed Tonga’s first anti-corruption commissioner and ongoing reforms to strengthen anti-money laundering and governance frameworks. They called for international financial support to sustain Tonga’s recovery and resilience-building efforts.
The IMF lauded Tonga’s monetary policy as appropriate, with inflation stabilized below the central bank’s 5% benchmark, but suggested tightening if inflationary pressures return.
