Tonga - First Growth and Jobs Development Policy Financing

Overview & Synopsis

The development objective of the Tonga First Growth and Jobs Development Policy Financing for the Kingdom of Tonga is to support reforms to strengthen economic resilience and promote private sector development as foundations for growth and job creation. The operation advances fiscal sustainability by improving domestic revenue mobilization and governance of tax expenditures, adjusting health excises on tobacco and alcohol, and introducing time-bound incentives that encourage adoption of electric and hybrid vehicles to reduce vulnerability to fuel price shocks. It strengthens debt management through a standardized framework for domestic government securities issuance that improves predictability and transparency, and enhances sustainable use of Tonga’s ocean resources via an integrated marine spatial planning framework and establishment of an Ocean Management Commission. The program also builds adaptive social protection capacity by modernizing privacy and civil registration laws to enable national rollout of the Vaka Sosiale social registry for timely, targeted assistance during shocks. To promote private sector development, it establishes modern consumer protection and competition safeguards, legally recognizes electronic communications, signatures, and contracts to enable digital transactions, and upgrades financial infrastructure through new payment systems and credit information frameworks, complemented by stronger insurance regulation. Finally, it addresses skills mismatches and job pathways by instituting a national apprenticeship policy with measures to improve women’s participation and by rolling out an employment network to connect jobseekers with employers. Expected results include higher domestic revenue, increased uptake of more energy-efficient vehicles, fully covered domestic debt auctions, operational ocean governance and marine spatial planning, expanded beneficiaries of cash-based interventions, greater firm dynamism and faster business registration, wider use of secure digital payments and comprehensive credit reporting, reduced youth not in employment, education, or training, and more women completing apprenticeships or registering for employment services.