This DSA was prepared jointly with the World Bank in accordance with the Debt Sustainability Framework for low-income countries approved by the Executive Boards of the IMF and IDA. The debt data underlying this exercise were provided by the Tongan authorities.
See “Debt Sustainability in Low-Income Countries: Proposal for an Operational Framework and Policy Implications” (http://www.imf.org/external/np/pdr/sustain/2004/020304.htm and IDA/SECM2004/0035, 2/3/04), “Debt Sustainability in Low-Income Countries: Further Considerations on an Operational Framework and Policy Implications” (http://www.imf.org/external/np/pdr/sustain/2004/091004.htm and IDA/SECM2004/0629, 9/10/04), and reference to “Staff Guidance Note on the Application of the Joint Bank-Fund Debt Sustainability.”
The 2008 DSA baseline shows an improved public debt and debt service profiles over the medium to long term as compared with those presented in the 2007 DSA where the reconstruction loan was assumed to be disbursed and utilized fully over a two-year period during FY08/09–09/10.
The average World Bank’s Country Policy and Institutional Assessment for the period 2005–2007 classifies Tonga as a poor performer. The corresponding debt distress thresholds are: NPV of debt-to-exports (100 percent), GDP (30 percent), and revenues (200 percent); and debt service in percent of exports (15 percent) and revenues (25 percent).
The baseline scenario assumes that net private transfer receipts will climb to an average 45½ percent of GDP over the projection period from a historical average of 33½ percent, mainly reflecting the recent increase in the number of Tongan workers abroad as well as a reduction in transfer costs.