Following the previous month’s decline, the reserves fell by $6.7m (US$2.9 million) to $685.7m (US$305.9 million), equivalent to 11.7 months of import, according to the National Reserve Bank of Tonga.
The decline in the Foreign Reserves was due to an increase in import payments during the month.
However, the Governor of the National Reserve Bank of Tonga, said that that annually, the Foreign Reserves had increased significantly by $228.2m (US$101.8 million). “This is mainly attributed to receipts of budget support, official grants, and remittances.”
In a statement on June 2021, he elaborated that the primary sector had exported more agricultural products, particularly cassava, yam, and taro.
There was also an increase in the lending to the Construction and the Manufacturing sectors, “implying more activities for the construction and manufacturing sectors, in particular.”
As to be expected, container registrations for the import of products from overseas increased substantially in March 2021, as most business container registrations indicated an active wholesale and retail industry.
It was estimated that more than 1000 containers were registered in March.
The Reserve Bank’s latest Gross Domestic Products (GDP) outlook projected a deeper contraction in the economy for 2020/21. However, the level of foreign reserves is still expected to be above the three months’ minimum threshold of import cover.
Inflation is expected to pick up above the 5% reference range, oil, and commodities coupled with rising freight rates amidst the COVID-19 uncertainties.
However, it is expected to fall back below the 5% reference range by the last quarter of 2021.
The Governor said that the Reserve Bank, “Stands ready to adjust its monetary policy settings if needed to maintain internal and external stability and support macro-economic growth....