Tonga is rebounding from the double shock in 2022 but, several supply side constraints are hampering a faster recovery. To sustain the on-going recovery, prudent macroeconomic management and effective implementation of structural reforms will be critical.

Inflation grew steeper and higher in 2022 peaking at 14% in September before easing in the last quarter where domestic inflation surprised on the upside overtook imported inflation since August 2022. This has pushed up the cost of living expenses and quickly depletes purchasing power of both households and businesses.

The external and financial stability have been maintained and the Reserve Bank’s principal objectives as laid out in Section 4(1) of the National Reserve Bank of Tonga (Amendment) Act 2014, shall be to:

  1. Maintain internal and external monetary stability.
  2. Without prejudice to its principal objective, the Bank shall:
    • Promote financial stability, and
    • Promote a sound and efficient financial system.

The MPS 2023 has revised the current accommodative policy and proposed monetary policy measures to manage a sharp resurgence in inflation over the next six months at the same time support targeted credit easing for vulnerable businesses and households to support economic recovery.