Overseas Exchange Transactions

August 2018

Released on 27 December 2018 | Download the complete release | 154 KB

Higher merchandise trade balance drives a deficit in the overall OET balance

Overall Balance & Foreign Reserve

Over August, the balance of the overall OET recorded a deficit of $1.5 million following a surplus recorded last month. This stemmed largely from higher payments for services and import purposes. Consequently, the official foreign reserves fell to $475.0 million over the month. The monthly balance was equivalent to 7.7 months of import cover.

Annually, the overall OET surplus balance rose by $31.2 million to $70.0 million due to surpluses in all accounts with the capital account recording the highest surplus. This was attributed to the rise of the official foreign reserves from $405.0 million in August 2017 (7.4 months of import).

In the near term, the Reserve Bank continues to forecast that the level of foreign reserves will remain at a comfortable level and above the 3 months of import cover. This is expected to be backed by the delayed budgetary support from 2017/18, grant funds from development partners, and anticipated higher receipts of remittances. This will be partially offset by the expected increase in imports and the Government’s external loan repayments. The pace of development in the domestic economic activities may also pose a risk to the foreign reserves outlook. Global uncertainties regarding oil and commodities prices paired with Tonga’s vulnerability to natural disasters are also risks to the projections above.

Current Account

Over the month, the deficit in the current account balance resulted from higher payments for services and import purposes. The decline was largely attributed to freight service payments for both sea and air freight. Additionally, payments for oil imports contributed to the overall rise in import payments. Furthermore, private transfer payments increased resulting from higher private transfers (such as gift payments to family and friends) and workers remittances (expatriate salary payments). The current account receipts declined particularly the official transfer receipts further aligning with the deficit recorded over the month.

Import payments continued to be the highest payment made, recording growth of 0.4% to $38.1 million. Payments for oil imports increased by $4.7 million due to a bulk payment made in August. This growth had offset the decline in payments for all other import categories, payments for other imports fell the most by $2.0 million. Furthermore, export proceeds rose slightly by $0.1 million and resulted mainly from an increase in the export of agricultural products.

The service account noted a surplus of $2.2 million in August 2018, lower than the surplus recorded last month. Despite the increase in service payments particularly air freight, sea freight, business travel, and school fee payments, it was outweighed by the service receipts, the majority of these receipts stemmed from travel purposes.

Although the income balance continued to record a surplus, both income receipts and income payments remained unchanged compared to the previous month.

In year ended terms, the surplus in the current account was lower by $32.0 million to $11.1 million. More specifically, the deficits in the merchandise trade and income accounts had partially offset the surpluses recorded for the services and private transfer accounts. As such, the higher payments for imported wholesale & retail goods, oil, and motor vehicles drove the higher merchandise trade deficit. This coincided with a rise in container registrations recording an increase of 812 containers indicating growth in the trade sector. Additionally, this was supported by the decline in proceeds from all sectors of export except other marine exports which recorded an increase. However, the private transfer receipts rose the most over the year recording an increase of $18.2 million whilst official transfer receipts remained stable. This resulted from continuous rises in remittances driving the increase in transfer receipts and further indicative of the consistent support of Tongan families abroad.

Capital Account

The surplus in the capital account fell by $1.5 million over the month. This was driven solely by the $1.8 million decline in the surplus of the official capital account offsetting the $0.3 million increase in the surplus from the private capital account. Both official capital and private capital transfer accounts recorded no payments during the month.

Annually, the capital account continued to maintain its position of holding the highest surplus in the overall OET balance. The capital account surplus increased by $7.3 million to $39.8 million. The fund receipts by both Government and the private sector for investment projects and capital expenditures (for construction purposes) rose over the year. As such, the official capital transfer receipts rose by $6.5 million whilst the private capital transfer receipts rose by $2.0 million. This outweighed the rise in official capital and private capital payments. The construction projects include the Tonga Transport Sector Consolidation road maintenance projects, the renovation works at Fua’amotu Airport under the Pacific Aviation Investment Program and individuals and private companies’ renovation works after Tropical Cyclone Gita.

Financial Account

The surplus in the financial account over the month was lower compared to the previous month as a result of a drop in the transfers by foreign commercial banks to their accounts in Tonga for payments to customers. Over the year, the financial account again recorded a surplus, and this was owing largely to other investments specifically, interbank receipts.

Overseas Exchange Transactions Releases

• Overseas Exchange Transactions Releases for 2018
• 2017
• 2016
• 2015
• 2014

Overseas Exchange Transactions Releases for 2018

	July Released on 23 November 2018 | 150 KB		August Released on 27 December 2018 | 154 KB
	May Released on 15 August 2018 | 337 KB		June Released on 4 October 2018 | 148 KB
	March Released on 7 June 2018 | 174 KB		April Released on 15 August 2018 | 333 KB
	January Released on 16 May 2018 | 179 KB		February Released on 29 May 2018 | 174 KB

2017

	December Released on 19 March 2018 | 300 KB		November Released on 2 February 2018 | 285 KB
	October Released on 25 January 2018 | 272 KB		September Released on 27 December 2017 | 476 KB
	August Released on 27 November 2017 | 458 KB		July Released on 16 October 2017 | 264 KB
	June Released on 16 October 2017 | 259 KB		May Released on 15 August 2017 | 262 KB
	April Released on 10 July 2017 | 268 KB		March Released on 28 June 2017 | 270 KB
	February Released on 28 June 2017 | 367 KB		January Released on 21 June 2017 | 307 KB

2016

	December Released on 21 June 2017 | 314 KB		November Released on 21 June 2017 | 303 KB
	October Released on 3 April 2017| 479 KB		September Released on 28 March 2017| 493 KB
	August Released on 14 February 2017| 492 KB		July Released on 9 November 2016 | 467 KB
	June Released on 5 September 2016 | 630 KB		May Released on 10 August 2016 | 615 KB
	April Released on 30 June 2016 | 617 KB		March Released on 7 June 2016 | 613 KB
	February Released on 17 May 2016 | 634 KB		January Released on 10 May 2016 | 621 KB

2015

	December Released on 22 April 2016 | 670 KB		November Released on 22 April 2016 | 658 KB
	October Released on 29 January 2016 | 494 KB		September Released on 27 January 2016 | 518 KB
	August Released on 8 January 2016 | 288 KB		July Released on 22 December 2015 | 312 KB
	June Released on 9 December 2015 | 554 KB		May Released on 6 October 2015 | 630 KB
	April Released on 15 July 2015 | 653 KB		March Released on 3 June 2015 | 672 KB
	February Released on 10 April 2015 | 385 KB		January Released on 3 June 2015 | 741 KB

2014

	December Released on 16 February 2015 | 471 KB		November Released on 16 February 2015 | 441 KB