The population of the Kingdom of Tonga stands at 121,000 spread over 170 coral islands in the South Pacific on a total land mass of only 748 km square. It is estimated that upwards of half the Tongan population lives abroad of which the country relies significantly on remittances to keep it afloat financially.
POLITICS: rocky transition from monarchy to democracy. Please contact BankINTRO.com for a detailed analysis from the implications of the November 2006 democracy riots to the country’s projections for national elections scheduled in 2010.
ECONOMY: small open economy reliant on donors/grants/remittances. Key components of the economy include agriculture in areas like coconuts, bananas, taro, cassava, vanilla beans to name a few, construction and tourism provides for the majority of hard currency earnings along with foreign aid/remittances.
The monarchy in the past have made some ill-advised investment decisions on extravagant business ideas from selling Tongan passports, dot com enterprise venture capital investments, space/aeronautical support, tire disposal, energy start-ups, etc. to name just a few of which the majority lost significant monies.
Total GDP as measured by purchasing power parity stands at 553 million USD with corresponding GDP per capita at 5373 USD. Market GDP was measured at 258 million USD (2008). GDP growth rate statistics include year 2009 projected at 2.6 percent, 2010 at 1.9 percent, year 2000 was at 5 percent. Inflation quotes include year 2008 at 11.1 percent, 2007 at 5.9 percent, year 2009 estimated at 12.3 percent and 2010 at 6.1 percent. Large trade shortfall at 117 million USD equivalents (2006). The current account was in deficit at 10 percent of GDP (2007). Tongan public debt stood at 45 percent of GDP (2007).
POSITIVE: peaceful country, universal medicine, well educated country. CONCERN: high rate of obesity & diabetes, oil imports & food price inflation.
BANKING SYSTEM: the National Reserve Bank of Tonga is responsible for issuance and management of the national currency, the pa’anga. Official reserve assets are very modest at 40 million USD (2004).
CURRENCY: ISO symbol, 'TOP'. Pa'anga is pegged to a basket of currencies. At time of review on May 15, 2009, the pa'anga had a value of 2.1074 TOP to 1 USD and/or 2.8652 TOP to the Euroland euro (EUR). The TOP is not freely convertible. Similar to other tiny economies, the TOP follows that of a pegged currency exchange rate regime. The pegged regime for the TOP is to a basket of currencies which includes the JPY, USD, New Zealand dollar and the AUD.
CURRENCY HISTORY: the pa’anga came into circulation in April 1967 when it replaced the British pound at an exchange valuation of 2 TOP to 1 GBP. Surprisingly, the currency has had a history of relative stability. Historical exchange quotes include: year 2006 at 2.027 TOP to the USD, year 2005 at 1.96, 2004 at 1.97, 2003 at 2.14, September 2002 at 1.81 TOP, January 2001 at 1.9885 TOP to 1 USD, January 2000 at 1.78, 1999 at 1.599, 1998 at 1.49, 1997 at 1.26, 1996 at 1.23, 1995 at 1.27, 1994 at 1.32, 1993 at 1.38.
CURRENCY FORECAST: the key currency risk factors is political with respect to final and complete devolution to full democracy handover and the elimination of monarchy involvement influence in the governing power of the country. If the turnover is not satisfactory, a possible repeat of the democracy violence and infrastructure damage may again engulf this tiny nation.