Prime Minister Misrepresents Fiscal Health of Tonga: Deficit Ignored
In a startling revelation, the former Finance Minister and Parliament member, Dr. Aisake Eke, has contradicted the Prime Minister’s recent statements regarding the 2023-24 budget. At a press conference on 28th July, the Prime Minister claimed that there was no budget deficit due to the government’s successful cost management strategies, with surplus funds being allocated to significant health initiatives.
The Prime Minister detailed that fund had been successfully redirected towards constructing a new hospital in Vava’u and a new training facility for nurses at Vaiola Hospital, made possible due to the non-existent deficit. He noted the projects were funded through aid from Australia and the World Bank, amounting to over TOP$40 million.
However, these claims fly in the face of the fiscal realities of the budget, which was passed by the Parliament with a majority vote of 14 in late June, recognizing a deficit of 30.2 million pa’anga. Dr. Eke confirmed this deficit, stating that the shortfall was financed by drawing down $27 million from cash reserves and borrowing an additional $3 million domestically.
Dr. Eke also indicated that the budget outturns for the last financial year 2022/2023 would be a deficit of $21 million, financed through borrowing from the International Monetary Fund (IMF).
He expressed serious concern over the medium-term sustainability of public finance in light of the government’s planned budget for the next three years from 2023/2024 to 2026/2027, in which the funding of government operations would result in a cumulative deficit of $84.4 million to be financed from cash reserve drawdown of $71.5 million and $12.9 million domestic borrowing.
In this fiscal strategy, the cash reserves, which have been built up and set aside over the years to support the government’s finance in difficult times to sustain its normal operation due to economic downturns or natural calamities, will dwindle to $23.9 million at the end of 2026/2027, leaving very tight space for future uncertainties.
The Prime Minister’s misrepresentation of the 2023-24 budget is a worrying sign, and calls for intensified scrutiny of the government in its handling of the nation’s finances.
