The grant will also help improve the country’s business climate with policy, regulatory, and public enterprise reforms.
“The Building Macroeconomic Resilience Program for Tonga has shown that budget support can achieve results if there is strong government ownership,” said ADB Principal Economist for the Pacific Ms. Ananya Basu. “A coordinated approach across development partners is key to the program’s success to date.”
The grant assistance will fund the third of three subprograms of the ADB-supported Building Macroeconomic Resilience Program for Tonga. The program builds on progress under two earlier subprograms of the initiative and previous policy-based support from other development partners, particularly the European Union, the World Bank, and the governments of Australia and New Zealand.
The policy actions supported by the third subprogram include measures to strengthen tax revenue mobilization, various public financial management improvements, the introduction of reforms to boost the financial viability of state-owned enterprises, and a stronger public sector remuneration framework and performance management system.
The ADB assistance is policy-based, meaning the funds are released as budget support once policy actions outlined in the program are successfully completed.
The program is consistent with ADB’s Strategy 2030 priority of strengthening governance and institutional capacity, particularly in small island developing countries.
Since 2008, ADB has significantly scaled up both its financial and technical support to Tonga, committing $87.7 million in grants and concessional loans, mobilizing $44.9 million in cofinancing, and providing about $8 million in technical assistance. ADB’s Pacific Approach, 2016–2020, which serves as the country partnership strategy for Tonga, has at its core the promotion of sustainable, inclusive economic growth and social development.