KINGDOM OF TONGA - SPREP

Strategic Development Plan 8 2006/07-2008/09
After four years of increasing deficits, the Government budget moved into
surplus in 2003/04 and 2004/05 (Figure 1.7). This change largely was the result
of a reduction in capital expenditure and the effect of a hiring freeze on the
public service wages bill, and was achieved despite a substantial final payment
of the Government’s loan guarantees for Royal Tongan Airlines, which was
liquidated in 2004.
The public debt increased in absolute terms during 1999/2000-2004/05 as
shown in Figure 1.8, but fell from 48% of GDP to 42% of GDP as a result of a
decline in the external debt to GDP ratio.
% of GDP
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
-5.00
Source: Ministry of Finance and Planning.
Figure 1.7: Government Finances
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05
Revenue & Grants
Expenditure
Overall Balance
During the period to June 2005, Government’s current expenditure grew
at a trend rate of 9.5%, with the wage and salaries component growing at the
slower rate of 5.3%. This resulted in a planned reallocation of current spending
towards non-wage goods and services, but left civil service remuneration lagging
behind inflation (averaging just over 8%) and below wages in the private sector.
There was therefore increasing pressure in 2005 for public service wage
adjustments.
Looking to the Future, Building on the Past 16