National Reserve Bank of Tonga

Private transfers rise in the lead up to Coronation

Private transfers rise in the lead up to Coronation

The total remittances receipt for the month of May was $19.9 million, representing 37.4% of the Total Overseas Exchange Transaction (OET) Receipts. This was a $3.6million increase from the previous month. Remittance receipts have continued to rise over the calendar year, most likely due to the upcoming coronation and Special Sundays throughout May.

The majority of remittances were received from Tonga’s main trading partners; the US (34%), Australia (33%) and New Zealand (26%), with little change over the month and year to May 2015. Over May, the Australian dollar (AUD) and US dollar (USD) appreciated against the Tongan Pa’anga (TOP), benefitting recipients in Tonga. The New Zealand Dollar (NZD), on the other hand, deprecated slightly against the TOP. However, the fall in  NZD had little impact on the level of remittances from New Zealand which reflects the significance of the upcoming events to the Tongan families.

Furthermore, it appears residents are more likely to remit money through Foreign Exchange Dealers (FEDs) with 89% of Total Remittances in May  received through the FEDs. Again, the most common currencies transacted through the FEDs are AUD, NZD and USD.

Private Transfers

Total private transfers are gifts and transfers into Tongan bank accounts, and account for 88% of Total Remittance Receipts. Over May, Private Transfers rose by 25% to $17.4 million. This is $1.3 million higher than private transfers received in May 2014, and the main cause for the overall rise in Remittance Receipts for this month. This is most likely due to money sent for preparations for a number of upcoming public celebrations such as; the Kings Coronation, White Sunday, Mother’s day and Father’s day. Given the majority of transfers were denominated in AUD, NZD and USD, the annual and monthly increase may also be due to developments in overseas economies. The unemployment rate fell over the month of May and the year ended May 2015 for both Australia and New Zealand, whilst the US economy has been steadily improving, as evidenced by the stronger USD.

Employee Compensation

Employee compensation is the sum of wages and salaries received from the Recognised Seasonal Employer (RSE) program and other Tongan residents working short term overseas. This figure increased slightly by 2.4% over May to $2.4million, representing 12% of Total Remittance receipts. However, employee compensation was 62% more in May 2015 compared to May 2014. The increases over the month and the year were due to higher remittances received from RSE workers. Approximately 60% of total employee compensation receipts were denominated in NZD as the  majority of RSE programs is based in New Zealand. Other main currencies for employee receipts were TOP and USD.

Private Capital Transfers

Private grants for investments and capital projects received by individuals amounted to approximately $58,000. This represents only 0.03% of Total Remittance receipts; a slight increase from the previous month. Private Capital Transfers fluctuates considerably from month to month as these payments are rare and not the common method for money to be remitted to Tonga. In April, 90% of  the Private Capital Transfers were denominated in $TOP however sent from the US for construction purposes.

Social Benefits

Pensions and other social benefits received by Tongan residents from overseas decreased to approximately $10,000 over May. These payments were denominated in $TOP and $USD, and represent only 0.05% of Total Remittance Receipts.

Outlook

Remittance receipts are anticipated to rise in the coming months leading up to the King’s Coronation, church conference and other school reunions. The NRBT will continue to closely monitor these receipts given they are one of the biggest inflows for Tonga’s economy.

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