Wednesday, 20 October 2010 11:01 AM

World Bank Group Announces Significant Increase In Assistance To Tonga

WASHINGTON, 19 October, 2010-The World Bank today announced a new strategy of support for Tonga to reduce the impact of economic shocks on the country and assist with longer term growth and development opportunities.

World Bank Group support for Tonga aims to support economic reform, generate opportunities through greater global and regional integration, and build resilience against shocks. The World Bank has scope to provide up to US$50 million in grant funding to Tonga over the next four year, significantly more than the US$33 million that has been committed since Tonga joined the World Bank in 1985.

"The World Bank is committed to increasing support for Tonga and creating opportunities for Tongan people," says Ferid Belhaj, World Bank Country Director for Timor-Leste, Papua New Guinea & Pacific Islands. "Like many small and remote island nations, Tonga's economy is highly vulnerable to external shocks such as the global slowdown and food and fuel price spikes, and it is the poor who experience the biggest impact. This strategy will help the government to better respond to challenges and support the country's most vulnerable people."

Consistent with the new strategy, Tongan Ambassador to the United Nations Sonatane Tu'a Taumoepeau Tupou and World Bank Regional Vice President Jim Adams signed agreements for two new grants by the World Bank to Tonga totaling $10 million.

"The first World Bank country strategy for Tonga represents a significant step up in the partnership between Tonga and the Bank" says Ambassador Sonatane Tu'a Taumoepeau Tupou. "The Tongan authorities are fully committed to continue their reform program with the backing of all its stakeholders."

Following the devastating tsunami in Niuatoputapu in September 2009, the Post-Tsunami Reconstruction Project, financed by a US$5 million grant, will fund the construction of 85 cyclone-resistant houses and the rehabilitation of a further 60 houses to reduce people's vulnerability to such extreme circumstances.

In addition, the World Bank will provide a US$5 million grant to the Government of Tonga to assist with the overall impact of the global financial crisis and the fuel price shocks. The financing will also support reforms being undertaken as part of the Tonga Energy Roadmap. This will open the electricity generation market to new investment, reduce reliance on imported diesel fuel, as well as strengthen public financial management. Given continuing economic pressures as a result of the global slowdown, the World Bank remains willing to work together with any new Government following elections to discuss reforms that would provide a basis for further budget support if needed in the future.

The new operations announced today will build on the World Bank Group's track record of success in assisting the Tongan Government's development efforts. World Bank Group assistance, including a US$7 million investment by the World Bank's private sector arm, the International Finance Corporation (IFC), helped to encourage the introduction of telecoms reform and competition that has seen mobile phone coverage in Tonga increase from 6 percent to 60 percent in less than five years. The World Bank has also worked closely with the Government of Tonga and donor partners such as Australia, New Zealand and Japan, to reconstruct Viaola hospital, renovate 20 schools throughout Tonga, and rebuild and rehabilitate over 800 houses following cyclone Waka in 2002.