Tonga: Supporting Recovery after Dual Shocks Development Policy Operation

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The development objectives of Supporting Recovery After Dual Shocks Development Policy Operation (DPO) for Tonga is to: (1) assist firms to maintain business continuity, protect livelihoods and support vulnerable households to maintain their investment in human capital; and (2) lay the foundations for a sustainable economic recovery. The DPO is both urgent and critical, given the magnitude of the economic crisis and the unanticipated financing gap that has opened as a result of the shocks. The DPO aims to support the Government of Tonga (GoT) to address the immediate response needs and lay the foundations for an inclusive and sustainable recovery. Pillar 1 supports actions that deliver targeted crisis responsive social protection payments, temporary fee relief for secondary school students, a wage subsidy program and financial assistance to both formal and informal firms. These actions also support crucial advances in Tonga’s adaptive social security system. Pillar 2 supports the extension and expansion of the government’s flagship microfinance program, the nation’s first international arbitration legislation, establishment of a new institution to lead housing sector resilience and recovery efforts, and adoption of a TC Harold housing recovery strategy. Along with providing immediate relief, the supported measures have also been designed to improve the core crisis-response mechanisms, which will serve the GoT well in responding more efficiently and effectively to future shocks.