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World Bank Supports Tonga’s Efforts to Strengthen Inclusive Growth

March 16, 2016

WASHINGTON, D.C., March 16, 2016—The World Bank’s Board of Executive Directors today approved US$2 million in concessional financing for the Kingdom of Tonga to support the country’s efforts to create a more inclusive, dynamic and resilient economy through targeted and well-planned policy reform.

The First Inclusive Growth Development Policy Operation is the first in a series of three development policy operations (DPOs). It will assist the Government of Tonga in delivering reform to support fiscal resilience through strengthened budgetary policies; promote inclusiveness and government accountability through new public procurement regulations, improved government audit responses and a new regulatory framework in the ICT sector; and foster a more dynamic and inclusive economy by adopting investor-friendly foreign investment legislation, extending coverage of the credit bureau and encouraging more private sector participation in public enterprises.

“The Government of Tonga is committed to this reform program which over the course of this government will usher in major transformations that will support improved government effectiveness, jobs, and a strong, inclusive society,” said Hon. Aisake ‘Eke, Tonga’s Minister for Finance and National Planning. “This program is closely aligned with our Strategic Development Framework 2015-2025, a plan guided by government, civil society and the private sector which outlines a medium-term vision for a more progressive Tonga, supporting a higher quality of life for all.”

The reform program will directly address hardship by targeting the high cost of basic goods through more effective regulation, reinforcing incentives for healthy living, and encouragement of a business environment conducive to more jobs and income-earning opportunities. Over the course of the program, reforms that will promote inclusiveness will also be introduced, including increased access to finance for smaller businesses in the second year, and stronger labor rights legislation in the third year.

“This operation is part of an ongoing policy partnership that has been supported by World Bank development policy operations in Tonga in each of the last five years,” said Franz Drees-Gross, World Bank Country Director for Timor-Leste, Papua New Guinea and the Pacific Islands. “The program is designed to boost growth to support shared prosperity and improve economic prospects for women and vulnerable groups.”

The operation is financed with a US$1 million credit and US$1 million grant from the International Development Association (IDA), the World Bank’s fund for the poorest countries. Australia, through the Department of Foreign Affairs and Trade, the Asian Development Bank and the European Union are all expected to provide budgetary support to Tonga in the coming year as part of the same policy framework.

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