Economic Updates to the Members of Parliament
- Category: Press Release
- Posted: 21 June 2016
The Governor of the National Reserve Bank of Tonga (NRBT), Dr. Sione Ngongo Kioa presented to the Members of Parliament (MPs) on 10th June, 2016 an update on the economy including the latest monetary and financial indicators. The monetary policy stance, policy actions by the NRBT and other issues were also discussed.
The NRBT projected strong real gross domestic product (GDP) growth over the four consecutive financial years 2015/16 through to 2018/19. Growth is expected to be driven by the construction, trade, tourism, fisheries and agricultural sectors. Inflationary pressures continued to ease in 2015 and it is relatively lower compared to Samoa and Fiji. The level of foreign reserves continued to remain above 3-4 months of import cover and the level of foreign reserves is expected to remain comfortably above the minimum range up to June 2017. The financial system remained sound as the banking system continued to be profitable and maintained strong capital and liquidity positions. Furthermore, the banks’ weighted average interest rate spread narrowed and is relatively lower than that of Solomon, Papua New Guinea and Samoa. Given the above developments, the NRBT maintained the current accommodative monetary policy stance.
Governor Kioa discussed the policy actions taken by the NRBT to support economic growth which includes the following:
- A minimum loan to deposit ratio target range of 80-90% effective on 1st July 2016 which is to be achieved progressively within the next 18 months;
- Financial inclusion initiatives to improve access to finance and inclusive economic growth;
- Developing the domestic financial markets to be more market based, active and liquid to improve the attractiveness of investment in local securities.
- Legislative changes which includes amendments to the Foreign Exchange Control Act and Financial Institutions Act and renaming this as the Banking Act as it focuses on bank supervision only; and new laws for the licencing and supervision of non-bank financial institutions such as the microfinance institutions, money lenders, credit union, retirement funds, insurance companies, investment funds and capital markets.
- Other policy tools under consideration for consultation with relevant stakeholders include:
* the use of a policy interest rate to influence interest rates of banks and non-bank financial institutions;
* improve access to finance with measures such as the establishment of a credit guarantee scheme to facilitate the access by Small to Medium Enterprises and addressing impediments to lending such as the land laws and bankruptcy laws, imposing of a requirement for all business transactions to be conducted through bank accounts;
* enhance the effectiveness of the credit bureau and the personal property security register in improving access to finance
* raise the income tax threshold to $15,000 to improve disposable income, consumption and ability to access loans, particularly for those who have over-borrowed;
* subsidise the freight costs for fishing exporters.
The NRBT values the opportunity to present to the MPs and it is anticipated that this presentation would provide the MPs with a better understanding of the economy, the NRBT’s mandate and policies, and issues that would support improvement in economic development from the perspective of the NRBT. This would in turn assist the MPs’ discussions and decision making in the Legislative Assembly. This would be an annual event for the NRBT’s communication and public relations strategies.
National Reserve Bank of Tonga