Tonga Second Inclusive Growth Development Policy Operation

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The development objectives of Second Inclusive Growth Development Policy Operation Project for Tongo 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. This program supports policy reforms under three pillars: i) Supporting fiscal resilience; ii) supporting improved government accountability and private sector regulation; and iii) supporting a more dynamic and inclusive economy. Under these three pillars, the government’s commitment to the implementation of the reform program is reflected in the completion of the prior actions set out. To support fiscal resilience, policy actions include the adoption of a new rule‐based fiscal strategy; strengthening of revenue collection through further excise tax increases; and the implementation of a new remuneration framework. To support government accountability and private sector regulation, this operation supports policy actions that introduce a new procurement monitoring system; and legislation to establish a multi sector energy regulator. To support a more dynamic and inclusive economy, the operation supports submission of a revised Foreign Investment Bill to the Legislative Assembly (LA); and the commercialization of two public enterprises (PEs).