ADB's Work in Tonga

Tonga faces many of the challenges typical in small island economies, including geographic isolation, limited human and financial resources, and high costs of doing business and providing basic services. The economy has a narrow base, dependent on inflows of remittances and external assistance and is vulnerable to external shocks. Tonga’s economy had a 2.4% averaged growth rate during fiscal years 2015–2019 ending in June. The gross domestic product contracted by 0.8% in fiscal year 2020 and 5.3% in fiscal year 2021 are, due to the impacts of disasters and the coronavirus disease (COVID-19) pandemic.

To date, ADB has committed 108 public sector loans, grants, and technical assistance totaling $303.8 million to Tonga. Cumulative loan and grant disbursements to Tonga amount to $177.6 million. These were financed by concessional ordinary capital resources, the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Tonga includes 1 loan and 11 grants worth $122.4 million.

ADB, through phase three of a Pacific Disaster Resilience Program will provide a $10 million contingent disaster financing grant for early recovery and reconstruction activities following disasters triggered by natural hazards or health emergencies including COVID-19. In 2020, ADB also provided grants totaling $1.7 million from the Asia Pacific Disaster Response Fund in response to COVID-19 and Tropical Cyclone Harold.

ADB is also active in the joint policy reform dialogue with the government and other development partners. This process is linked to the budget support disbursement of $12.2 million in June 2020 and $5 million in November 2021, delivered through ADB policy-based grants.

To boost resilience to disaster risks and climate change, in December 2020, ADB committed a $45 million grant to upgrade the Queen Salote International Wharf in Nuku’alofa. A total of $53.2 million was committed in 2019 to expand renewable energy generation and finance the installation of new battery storage systems. Along with the Outer Island Renewable Energy Project totaling $28.1 million, both projects will support Tonga’s renewable energy targets and facilitate private sector investments.

In 2019, ADB also provided assistance of $18.3 million to improve urban infrastructure and services in Tonga’s capital.

Construction workers laying water pipes. The Nuku'alofa Urban Development Sector Project will support the establishment of a municipal government in Nuku'alofa and enhance municipal services, including water supply, solid waste, and sanitation. Photo: Eric Sales/ADB

Operational challenges. In 2018, the Global Climate Risks Index ranked Tonga the second most at-risk country worldwide. Tonga’s main challenges are to sustain economic recovery beyond the COVID-19 pandemic, mitigate potential damages caused by natural hazards, and create jobs for its youth. Furthermore, Tonga’s relatively limited business environment also restricts the ability to source local contractors and consultants to implement ADB-financed activities.

Accordingly, ADB is providing technical assistance to build the government’s capacity to improve gender outcomes, private sector development, international arbitration, climate and disaster resilience, social protection, water supply and sanitation, domestic transport networks, and public sector management.

COVID-19 Response

ADB committed a $7.5 million grant project in 2019 to customize and implement a national digital health information system. Additional financing of $5.5 million in 2021 for COVID-19 vaccine introduction will support cold chain equipment and health system surveillance and reporting.

Knowledge Work

ADB brings added value beyond its role in project financing. It provides advice to the Government of Tonga and supports policy reform in the areas of fiscal policy, public financial management, state-owned enterprise performance, private sector and financial sector development, and gender equality. ADB’s flagship publications, including the Asian Development Outlook and the Pacific Economic Monitor, provide key analytical work to support decision making.

ADB also participates in joint missions with other development partners, including International Monetary Fund Article IV missions, which feature robust discussions with the government on strategic priorities and other critical issues that require coordinated support. ADB also provides capacity development through workshops and seminars to increase access to knowledge and expertise for counterpart officials in Tonga.

  ADB Projects in Tonga Project data sheets for loans, grants, TAs

Future Directions

ADB's Pacific Approach, 2021-2025, serving as the country partnership strategy for Tonga, aligns with the country’s Strategic Development Framework II, 2015–2025. The approach focuses on building resilience against economic shocks, delivering sustainable services, and promoting inclusive and sustainable growth while recovering from the impacts of COVID-19. The strategy introduces new priorities areas, including a more programmatic approach to climate change support, a deeper focus on long-term capacity support, increased flexibilities in procurement and contracting, and an emphasis on gender equality.

ADB assistance to Tonga will focus on promoting renewable energy, improving transport assets, making the capital, Nuku’alofa, a more livable city, protecting the vulnerable groups, building resilience to climate risks, sustaining good fiscal management, and strengthening health systems. Targeted technical assistance will remain an integral part of ADB support to Tonga.

This article was originally published in the ADB and Tonga: Fact Sheet. Updated yearly, this ADB Fact Sheet provides concise information on ADB's operations in the country and contact information.

Last updated: 26 October 2022