The Tongan government is set to launch a domestic bond market aimed at providing local businesses with better access to affordable financing, as announced by Prime Minister Dr ‘Aisake Eke. During a press conference in Nuku’alofa, Dr Eke emphasized the initiative’s objective of reducing borrowing costs, addressing the current reliance of many local companies on high-interest loans and personal funding sources.
This strategic move is poised to play a significant role in the upcoming national budget, reflecting the government’s commitment to fostering business growth across the nation. The announcement aligns with Dr Eke’s recent engagements with key financial institutions, including the World Bank and the Asian Development Bank (ADB), focusing on boosting private sector financial accessibility. The ADB has expressed willingness to lend directly to businesses at rates lower than the existing three percent benchmark established by the World Bank and Tonga’s Reserve Bank, with a particular emphasis on supporting women-led enterprises.
In a milestone development, Tonga has authorized the ADB to issue bonds in its local currency, the paʻanga, both domestically and internationally. This decision, formalized during the ADB’s 58th Annual Meeting in Milan, aims to enhance the resilience of Tonga’s economy by reducing dependence on foreign exchange, which can be volatile.
The bond market initiative not only serves as a critical tool for economic recovery following the devastating 2022 Hunga-Tonga-Hunga-Ha’apai volcanic eruption but is also supported by a US$25 million grant from the World Bank designated to strengthen financial and disaster resilience in Tonga. This multifaceted approach underscores the government’s dedication to creating a more conducive environment for business growth and economic stability.
Moreover, the ADB’s ongoing support is identified as pivotal for both Tonga and its Pacific neighbors, including Fiji, as they advance local currency financing initiatives designed to foster sustainable economic growth and reduce foreign exchange risks. With the backing of financial institutions and a commitment to economic reform, there is a hopeful outlook for Tonga’s economic future, emphasizing increased investment opportunities and a resilient financial framework.
The collaborative efforts among Tonga, the ADB, and other stakeholders encapsulate a forward-looking vision for sustainable development, replete with the promise of growth in local businesses and the overall economy.
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