Media Releases for 2019

Monetary Policy Decision - April 2019

The National Reserve Bank of Tonga’s Board of Directors at its board meeting on the 30th April 2019, approved to maintain its current monetary policy measures outlined below. This is to encourage utilisation of the excess liquidity in the banking system, through further lending in order to support economic growth and strengthen the monetary policy transmission mechanism.

  1. maintain the monetary policy rate at 0% (zero interest rate policy);
  2. maintain the minimum loans/deposit ratio of 80%;
  3. maintain the Statutory Reserve Deposit ratio at 10%, and
  4. maintain the inflation reference rate at 5%.

The Governor of the Reserve Bank, Sione Ngongo Kioa, provided an economic update which showed mixed growth for the month of February. The agricultural export volume increased by 31.3 tonnes mainly due to more exports of root crops such as cassava and yam. However, this contrasted with the decline in export proceeds for the month indicating a possible lag. Moreover, construction activities slowed in February reflected by lesser loans extended to the construction sector whilst individual housing loans rose slightly. Remittances dropped again this month due to lower private transfers for family support from abroad. Furthermore, container registrations declined mainly due to a decrease in private containers. Travel receipts fell and coincided with the decline in total international air arrivals. Meanwhile, electricity consumption increased in February coinciding with a rise in electricity consumers.

The banking system remained sound as banks continued to maintain a strong capital position supported by adequate profits. The banks’ total loans to deposit ratio increased to 76.0% from 74.8% in the previous month. The monthly rise in the ratio reflects the greater decline in deposits outweighing the increase in loans. This ratio is still below the 80% minimum loan to deposit ratio, however, the commercial banks have respectively improved on this ratio over the year due to the active lending activities utilizing the capacity available for further lending. The weighted average interest rate spread widened in February driven by a increases in both the weighted average lending rate and weighted average deposit rate.

Foreign reserves declined in February 2019 by $5.5 million to $473.5 million equivalent to 7.9 months of imports cover. This is a result of higher import payments made over the month.

February 2019 annual headline inflation remained low recording a 3.2% increase. The domestic and imported component of inflation contributed 3.8% and -0.5% percentage points respectively to the annual headline inflation. The yearly increase in domestic prices is attributed to an increase in the prices of food, tobacco, restaurants and hotels while the imported component declined driven mostly by lower prices within the transport and services sectors.

Tonga’s economic performance remains positive in the medium term, however weather uncertainty poses a risk to the outlook. The foreign reserves are projected to remain at a comfortable level and inflation is likely to remain below the reference rate of 5% per annum. The banking system is to continue to remain strong.

Given the above developments and outlook, the current monetary policy stance is considered appropriate in the medium term. The Reserve Bank continues to adopt measures to encourage the utilisation of the excess liquidity in the banking system to increase lending to support domestic economic activities and strengthen the monetary policy transmission mechanism. The Reserve Bank will continue to remain vigilant and closely monitor external and domestic developments and may change its monetary policy setting to support its monetary policy objectives.


Economics Department
National Reserve Bank of Tonga
Fasi mo e Afi

Telephone: (676) 24057
Fax: (676) 24201

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.


Press Release in English | Press Release in Tongan
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