Tonga Second Inclusive Growth Development Policy Operation: Supplemental Financing

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The development objective of the Second Inclusive Growth Development Policy Operation Project are to: i) Support fiscal resilience by means of strengthened revenue mobilization and strategic fiscal and debt policies; ii) support improved government accountability and private sector regulation by improving compliance with public procurement regulations, improving budgetary classifications, improving the adequacy of responses to external audit, and introducing new regulatory frameworks into selected sectors; and iii) support a more dynamic and inclusive economy by adopting investor-friendly foreign investment legislation, extending coverage of the credit bureau, improving oversight and private participation in public enterprises, and introducing regulation to private sector labor markets. The proposed operation provides USD 10 million in supplemental financing for the Second Inclusive Growth Development Policy Operation (DPO2) to help the Government of Tonga (GoT) cover an unanticipated financing gap that has arisen due to the impact of Tropical Cyclone (TC) Gita. On April 27, 2017, the Board approved DPO2 – valued at USD 5 million. The request for supplemental financing is consistent with the World Bank policy on Development Policy Financing. The proposed USD 10 million supplemental financing is needed to support the GoT in its recovery efforts, given the inability of the government to obtain sufficient funds from other sources in the required timeframe and on sufficiently concessional terms. Overall, the program encapsulated by the three-DPO programmatic series remains broadly on track, and the government remains committed to the implementation of the supported actions in DPO2.