The financial system remains sound from high liquidity, adequate capital buffers, and sustained profitability. However, the elevated level of NPLs highlights the need for prudent lending practices and enhanced oversight.

The financial system remains sound, underpinned by high liquidity, adequate capital provisions, and profitability. Nonetheless, the high NPL ratio reasserts need for prudent lending management and stronger oversight, both on-site and off-site.

The NRBT is progressing with its efforts in strengthening its policy tools to enhance the effectiveness of its monetary policy decisions in the domestic financial market and the economy, while being resilient to risks in the financial system.

Given the state of the economy and the outlook, the NRBT maintains its neutral stance as stated in its August 2025 Monetary Statement, to ensure the resilience of the financial system in the face of elevated risks.

Given the state of the economy and the outlook, the NRBT in its August 2025 Monetary Policy Statement has shifted from its accommodative to a neutral policy stance in response to persistently high core inflation at over 9 percent.

Some fluctuation in inflation is expected over the upcoming high season months, but with not much deviation above the 5% reference rate.

The Tongan economy is showing progress in its recovery, supported by the fiscal expansion and the accommodative monetary policies.

While the current domestic economic growth forecasts indicate lower than expected growth in key sectors, the slow improvement in agriculture supports the expected recovery.

Current domestic economic growth forecasts indicate lower than expected growth in key sectors, necessitating continued financial support for private sector development to aid in boosting domestic production. Capital investments in resilient and sustainable infrastructure are vital to mitigate Tonga’s climate-related risks.

Domestic economic growth forecasts for Tonga remain gloomy, underpinned by the slow recovery of the primary sector and lower-than-expected pickup in the performance of the industry and services sectors. Escalating trade tensions in developed economies disrupts global growth and inflation, while intensifying policy uncertainties. This is expected to have negative spillovers on Tonga’s domestic growth.