Tonga Economic Recovery Operation

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The Economic Recovery Operation Program will assist the Government of Tonga (GoT) to implement key aspects of its medium-term reform agenda, while providing a predictable flow of resources in a challenging fiscal environment. Tonga's economy is beginning to recover from the series of crises that have buffeted it in recent years, but the incipient recovery is dependent on external support. Tonga is a small, remote economy that is highly vulnerable to external shocks and dependent on a limited number of sources of foreign exchange. In recent years, Tonga has undertaken a number of important public sector and economic reforms, but robust economic growth has remained elusive. Over the last four years, the series of crises that have buffeted the Tongan economy have caused economic contraction, a significant fiscal gap, and rising poverty. The multi-year programmatic series of operations will assist the GoT to appropriately sequence key public sector and economic reforms over a medium-term time horizon, while supporting the GoT's capacity to deliver services in a challenging fiscal environment. The operation carries a high risk on account of the limited institutional capacity of the GoT, the recent nature of Tonga's political reforms, and Tonga's uncertain external environment.