Tonga at FEMM: disaster risk financing the priority

Islands Business reporter Sera Tikotikovatu-Sefeti has been talking to Pacific Islands ministers and officials at the Forum Economic Ministers Meeting about their economic priorities and regional opportunities.

Here are excerpts from a conversation with Tonga’s Finance CEO, Kilisitina Tiane Tuaimeiapi. The responses have been lightly edited for length.

How is Tonga coping with the increase in prices of fuel, transportation, and food?

Everything is determined by international movements in supply and demand for those two items. We have been projecting an 11% inflation rate for Tonga. It might go down later, but it all depends, since the impact of the war [in Ukraine] is uncertain.

Food security is a cause of concern for us, and the government has been working on how to address the issue of inflation. Currently, the government has been subsidising the price of fuel at around 20 cents per litre, which we think is to help the people lighten the burden of inflation. In addition to that, we also look at other areas in terms of fiscal consultation, for instance some expenditures inside the government, by focusing only on critical spending. We are also collaborating to look at areas within economic sectors to ensure that they remain afloat during this period. Because they are the ones responsible for the supply of things, they will be supplying all of Tonga. Tonga is currently experiencing a triple shock: the COVID, volcano eruption, and inflation.

How is the government addressing the issue of inflation?

We are fortunate that the donor countries have been assisting us in terms of protecting the vulnerable, like the people with disabilities and the households that have been affected by these things. At the same time, we as a government are trying to look at the measures we take in trying to address that issue of inflation.

But at the same time, we are looking at how the Reserve Bank would complement the government in terms of trying to control the interest rate, so that inflation will not increase too much. The Reserve Bank will look at it from that side and try to monitor our liquidity levels.

Tonga is no different from any other country with this impact.

What is Tonga’s agenda at FEMM?

We are focusing mostly on disaster risk financing… that’s important to us given the situation of the country and how vulnerable we are. As I mentioned in my intervention, Tonga is ranked number 2 or 3 at times, but right now we are number 3 in the whole world in terms of vulnerability to climate change. We came in and seeking support from donor countries not only in the region but also the multilaterals in the global assistance.

[We want] member countries to keep in mind that Tonga still needs the support, and you know these disasters and the climate change risk. Tonga won’t get away anytime soon, but we have to accept it because it’s going to be there every year, it’s beyond our control, and it’s something that is really critical for us. And with our support, the government is moving towards ensuring that the government assets have been climate proofed. We have been looking at our building codes to make sure that our building is climate proofed. We have to look at our policy side of things to make sure that we are strong enough to keep us safe and our assets.

There is talk of forming a hub in the Pacific consisting of FEMM regional members in order to access climate finance funds. Would Tonga be open to this?

Yes, we would love to see that.

As I had mentioned in one of my interventions, timeliness is key for us because hurricanes, earthquakes, and tsunamis can happen at any time. Even though the funds are there, we need a process that is more streamlined and a structure that is something that we can carry as soon as possible to be able to cope with the challenges of disasters.