[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-111885-en":3,"doc-seo-111885-105":29,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":20,"is_downloadable":20,"audit_status":20,"page_count":21,"language":22,"language_code":23,"site_id":24,"html_lang":23,"table_of_contents":25,"faqs":26,"seo_title":13,"seo_description":14,"update_tm":27,"read_time":28},111885,13056703019662,"Evangeline","https://ap-avatar.wpscdn.com/avatar/be000253a8e92610077?_k=1778726343310543188",8,"Research & Report","Tonga - Joint Bank-Fund Debt Sustainability Analysis - Risk of External Debt Distress (High)","Tonga’s joint World Bank–IMF Debt Sustainability Analysis rates the risk of external debt distress and the overall risk of debt distress as high. The assessment highlights declining indebtedness pre-pandemic, followed by elevated debt since 2020 amid multiple shocks and increased support through grants, concessional loans, and debt service suspensions. Under the baseline, the present value of external debt-to-GDP is projected to breach high-risk thresholds starting FY2034 and continue through FY2044. Natural-disaster shocks would significantly worsen sustainability, requiring stronger revenue mobilization and expenditure rationalization alongside continued donor support.","Public Disclosure  \nPub lic Disc losure Authorized  \nApproved by:  \nManuela Francisco and Lalita Moorty (IDA) and Lamin Y.M. Leigh and Bergljot Bjornson Barkbu (IMF)  \nPrepared by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF)  \n\n| TONGA: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS |  |\n| --- | --- |\n| Risk of external debt distress | High |\n| Overall risk of debt distress | High |\n| Granularity in the risk rating | Sustainable |\n| Application of judgment | Yes. Considering the expected significant breach over the extended projection horizon from FY2034 until FY2044 and the impact of natural disasters on debt dynamics. |\n\nThe risk of debt distress rating for Tonga remains high.1 Before the pandemic, Tonga’s indebtedness had gradually declined from FY20152 to FY2019 owing to much-needed fiscal consolidation. Since 2020, however, the economy has been hit by multiple shocks. In response, the international community has stepped up financial support to Tonga through grants, concessional loans, and debt service suspensions. Thus, the debt increased and remained elevated until FY2023 . The public debt-to-GDP ratio in FY2024 is expected to decline on the backdrop of increased repayment of external debt. The budget deficit is expected to rise sharply in the coming years due to a gradual decrease in grants based on current commitments and continued spending needs for sustainable development goals (SDG) and climate resilience. Debt service payments will remain elevated in FY2025 due to scheduled repayment to the China Exim Bank. Under the baseline scenario, the present value (PV) of the external debt-to-GDP ratio is expected to breach the high-risk threshold starting in FY2034, while the PV of the public debt-to-GDP ratio is also expected to exceed the  \n1 The Tonga Composite Indicator (CI) index, calculated based on the April 2024 World Economic Outlook (WEO) and the 2022 Country Policy and Institutional Assessment (CPIA), is at 3.06; hence, Tonga’s debt carrying capacity classification remains “strong”.  \n2 All the figures are computed using fiscal year beginning in July, e.g. , FY2023 runs from July 1, 2022, to June 30, 2023.  \nbenchmark in the same year. The breach will continue after FY2034 as both external and public debt continue to rise through the end of the projection horizon in 2044. A tailored, large one-time natural disaster shock would result in a significant deterioration in debt sustainability. To rebuild fiscal buffers and enhance resilience against shocks, measures for stronger revenue mobilization and expenditure rationalization will be essential, together with continued support from external donors consistent with the historical trends.  \n1. Tonga’s public debt includes obligations of the central government and central bank. The central bank’s debt is borrowed on behalf of the government. Local governments do not incur debt, nor do other entities in the general government. As of end-June 2024, other government-guaranteed debt was small, about 1.2 percent of GDP. 3 Since the Debt Sustainability Analysis (DSA) coverage does not include debt of state-owned enterprises (guaranteed and non-guaranteed) due to data limitations, an additional  \n2 percent of GDP is added to the contingent liability test. Contingent liabilities also include a standard  \n5 percent of GDP cost to the government of a financial crisis, which is above the existing stock of financial sector NPLs.4 The DSA is conducted on a residency basis. The coverage is appropriate for the DSA but would be enhanced if the debt of SOEs is available.5  \n\n|  |\n| --- |\n| 1 Subsectors of the public sector Sub-sectors covered Central government X 2 State and local government X 3 Other elements in the general government X 4 o/w: Social security fund X 5 o/w: Extra budgetary funds (EBFs) X 6 Guarantees (to other entities in the public and private sector, including to SOEs) 7 Central bank (borrowed on behalf of the go","cbCaimKUOk1w50Xd","https://ap.wps.com/l/cbCaimKUOk1w50Xd","pdf",725750,1,20,"English","en",105,"# Risk assessment\n## External debt distress risk\n## Overall risk of debt distress\n## Judgment and scenario assumptions\n# Debt dynamics and fiscal outlook\n## Pre-pandemic consolidation and pandemic-era shocks\n## Grants, deficits, and debt service profile\n## Baseline breach projections (FY2034-FY2044)\n# Contingent liabilities and coverage\n## Public debt definition and subsectors\n## Contingent liability tests and limitations\n## SOE debt and data constraints\n# Debt bulletin and data updates\n## Quarterly Debt Bulletin resumption\n## Estimated government-guaranteed debt","[{\"question\":\"How does the DSA rate Tonga’s debt distress risk?\",\"answer\":\"The analysis rates both the risk of external debt distress and the overall risk of debt distress as High.\"},{\"question\":\"When is the breach of the high-risk threshold projected to occur under the baseline?\",\"answer\":\"Under the baseline scenario, the PV of external debt-to-GDP is expected to breach the high-risk threshold starting in FY2034 and remain above it through FY2044.\"},{\"question\":\"What would most affect Tonga’s debt sustainability besides the baseline path?\",\"answer\":\"A tailored, large one-time natural disaster shock would cause a significant deterioration in debt sustainability by worsening debt dynamics.\"}]",1784492143,50,{"code":4,"msg":30,"data":31},"ok",{"site_id":24,"language":23,"slug":32,"title":13,"keywords":33,"description":14,"schema_data":34,"social_meta":86,"head_meta":88,"extra_data":90,"updated_unix":27},"tonga-joint-bank-fund-debt-sustainability-analysis-risk-of-external-debt-distress-high","",{"@graph":35,"@context":85},[36,53,68],{"@type":37,"itemListElement":38},"BreadcrumbList",[39,43,47,50],{"item":40,"name":41,"@type":42,"position":20},"https://docshare.wps.com","Home","ListItem",{"item":44,"name":45,"@type":42,"position":46},"https://docshare.wps.com/document/","Document",2,{"item":48,"name":12,"@type":42,"position":49},"https://docshare.wps.com/document/research-report/",3,{"item":51,"name":13,"@type":42,"position":52},"https://docshare.wps.com/document/tonga-joint-bank-fund-debt-sustainability-analysis-risk-of-external-debt-distress-high/111885/",4,{"url":51,"name":13,"@type":54,"author":55,"headline":13,"publisher":57,"fileFormat":60,"inLanguage":23,"description":14,"dateModified":61,"datePublished":62,"encodingFormat":60,"isAccessibleForFree":63,"interactionStatistic":64},"DigitalDocument",{"name":9,"@type":56},"Person",{"url":40,"name":58,"@type":59},"DocShare","Organization","application/pdf","2026-07-20","2026-07-19",true,{"@type":65,"interactionType":66,"userInteractionCount":20},"InteractionCounter",{"@type":67},"ViewAction",{"@type":69,"mainEntity":70},"FAQPage",[71,77,81],{"name":72,"@type":73,"acceptedAnswer":74},"How does the DSA rate Tonga’s debt distress risk?","Question",{"text":75,"@type":76},"The analysis rates both the risk of external debt distress and the overall risk of debt distress as High.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"When is the breach of the high-risk threshold projected to occur under the baseline?",{"text":80,"@type":76},"Under the baseline scenario, the PV of external debt-to-GDP is expected to breach the high-risk threshold starting in FY2034 and remain above it through FY2044.",{"name":82,"@type":73,"acceptedAnswer":83},"What would most affect Tonga’s debt sustainability besides the baseline path?",{"text":84,"@type":76},"A tailored, large one-time natural disaster shock would cause a significant deterioration in debt sustainability by worsening debt 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