Budget Statement 2012‐2013 Government of the Kingdom of Tonga “CREATING OPPORTUNITY IN EXTRAORDINARY TIMES” ‘Ikale Tahi players rejoicing after victory over France at the 2011 Rugby World Cup, 1st October 2011, Wellington Regional Stadium Ministry of Finance & National Planning, Nuku’alofa, June 2012. Government of Tonga Budget Statement for year ending 30th June 2013 Table of Contents FIGURES .......................................................................................................................................................... 3 TABLES .......................................................................................................................................................... 4 1 FOREWORD ..................................................................................................................................................... 6 2 THE NATIONAL DEVELOPMENT VISION ........................................................................................................... 7 2.1 OUTCOME OBJECTIVES ................................................................................................................................ 7 2.2 ENABLING THEMES ..................................................................................................................................... 7 3 BUDGET ESTIMATE AT A GLANCE .................................................................................................................... 8 4 MAIN BUDGET EXPENDITURE CHANGES ....................................................................................................... 10 5 REVIEW OF CURRENT PROGRESS .................................................................................................................. 13 5.1 ACHIEVEMENTS AGAINST TSDF OUTCOME OBJECTIVES .................................................................................... 13 5.2 RECENT ECONOMIC PROGRESS & OUTLOOK .................................................................................................. 20 5.3 PUBLIC DEBT POSITION ............................................................................................................................. 22 5.3.1 Total Public Debt at 30 June 2012 ................................................................................................................ 23 5.3.2 External Debt ................................................................................................................................................. 23 5.3.3 Currency Denomination ................................................................................................................................. 24 5.3.4 Domestic Debt ................................................................................................................................................ 24 5.3.5 Debt Service .................................................................................................................................................... 25 5.3.6 On-lent Debt ................................................................................................................................................... 25 5.3.7 Guaranteed Debt ............................................................................................................................................ 27 5.4 KEY CHALLENGES IDENTIFIED ...................................................................................................................... 31 6 GOVERNMENT BUDGET RESPONSE TO CURRENT SITUATION ....................................................... 32 6.1 PRIORITY FOCUS FOR BUDGET .................................................................................................................... 32 6.1.1 Improved Private Sector Development .......................................................................................................... 32 6.1.2 Improved Community Development ............................................................................................................... 32 6.1.3 Enhanced Governance ................................................................................................................................... 32 6.1.4 Improved productivity and effectiveness of the public sector ....................................................................... 33 6.2 PLANNED GOVERNMENT ACTIVITIES BY ALL OUTCOME OBJECTIVES .................................................................... 33 6.3 SUMMARY OF 2012/2013 BUDGET ESTIMATE .............................................................................................. 41 6.3.1 Government Financial Statistics (GFS) ......................................................................................................... 41 6.3.2 Revenues and Grants ...................................................................................................................................... 43 6.3.3 Expenditure and net lending .......................................................................................................................... 43 6.3.4 Financing ........................................................................................................................................................ 43 6.3.5 Focus of Aid Funded Expenditure in Budget ................................................................................................. 43 7 CONCLUSION ............................................................................................................................................. 49 ANNEX I: TSDF REVIEW .............................................................................................................................. 50 1 EXECUTIVE SUMMARY AND FOCUS AREAS ................................................................................... 51 1.1 FOCUS AREAS IN 2012/2013 ........................................................................................................ 52 2 INTRODUCTION ............................................................................................................................ 53 3 REVIEW OF PROGRESS .................................................................................................................. 54 3.1 REVIEW AGAINST THE TSDF 9 OUTCOME OBJECTIVES (OOBJ) ..................................................................... 54 3.2 REVIEW AGAINST THE TSDF 4 ENABLING THEMES ..................................................................................... 63 1 | Page Government of Tonga Budget Statement for year ending 30th June 2013 ATTACHMENT 1 ‐ RELATIONSHIP BETWEEN TSDF AND OTHER PLANS ............................................. 66 ATTACHMENT 2 ‐ MAIN ISSUES RAISED BY OUTER ISLANDS CONSULTATIONS ................................. 68 ANNEX II: ECONOMIC & SOCIAL DEVELOPMENT AND OUTLOOK .................................................... 79 1 GLOBAL AND REGIONAL DEVELOPMENT ...................................................................................... 79 2 RECENT ECONOMIC PROGRESS AND OUTLOOK IN TONGA ........................................................... 81 3 GDP SECTOR PERFORMANCE ........................................................................................................ 83 3.1 PRIMARY SECTOR ......................................................................................................................... 84 3.1.1 Agriculture ............................................................................................................................................. 85 3.1.2 Forestry ................................................................................................................................................. 85 3.1.3 Fisheries ................................................................................................................................................ 85 3.2 SECONDARY SECTOR ........................................................................................................................... 86 3.2.1 Mining and Quarrying .......................................................................................................................... 86 3.2.2 Manufacturing ....................................................................................................................................... 87 3.2.3 Electricity and Water supply ................................................................................................................. 87 3.2.4 Construction .......................................................................................................................................... 88 3.3 TERTIARY SECTOR ............................................................................................................................... 88 3.3.1 Whole Sale and Retail Trade ................................................................................................................ 89 3.3.2 Hotels & Restaurants ............................................................................................................................ 89 3.3.3 Transport and Communication ............................................................................................................. 90 3.3.4 Financial Intermediation ...................................................................................................................... 90 3.3.5 Public Administration and Services 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