A TP$74 million government loss in the Auditor General’s report to Parliament last week on the government’s 2017 accounts was caused by the high foreign exchange rates, Minister of Finance Pōhiva Tu’i’onetoa said.
Hon. Tu’i’onetoa, a former auditor general, said the loss could become a profit next year if the Tongan currency traded more strongly against foreign currencies.
The $74 million was the total amount of loss after the government’s assets and liabilities which were in foreign denominations had been exchanged into Tongan pa’anga.
The Minister was responding after Opposition MPs blamed the government for the loss.
The TP$74 million loss has become a weapon for anti-government elements who have claimed the ‘Akilisi Pōhiva government abused its financial responsibilities.
They have attacked the government in the wake of the Supreme Court’s ruling that the payment of TP$90 million to Princess Pilolevu’s Satellite company was illegal.
“No one in the ‘Akilisi Pōhiva government misappropriated the TP$74 million,” the Minister said.
Auditor’s report
Hon. Tu’i’onetoa said when the Auditor General made his annual report on government assets and liabilities their values must be in Tongan pa’anga.
This included local loans, international loans, cash on hand and at banks and all other investments.
Some of these liabilities and assets were in foreign denominations, including bank accounts which were kept in US dollars, the Minister said.
The exchange from foreign currencies into Tongan pa’anga could either generate losses or profits depending on the exchange rates for those currencies.
Examples
Hon. Tu’i’onetoa gave Kaniva News examples.
He said if Tonga borrowed US$10 million on 30 June 2016 at an exchange rate of TP$1.50 to the US dollar this would appear on the auditor’s report for the first time on June 30, 2016 as a liability of TP$15 million.
If by June 30, 2017 this loan had not been paid and the US exchange rates increased from US$1.5 to US$2.5 the loan would be recorded in the government’s balance sheet as TP$25 million.
This meant, the US$10 million borrowed on 30 June 2016 had become US$25 million on June 30, 2017, a difference of $10 million.
The minister said this was called Foreign Exchange Risk Exposure or loss.
If Tonga wanted to pay its US$10 million loan while the rate was US$2.5 it had to pay $25 million.
Hon. Tu’i’onetoa said this was why the TP$74 million appeared on the auditor’s report.
“It was just a loss caused by the fluctuation of foreign and Tongan exchange rates.”
Tongasat unlawful payments
The TP$74 million appeared on the Auditor General’s report on June 2017 and the TP$90 million transferred to Tongasat, which was first reported by the Auditor General in 2013, were absolutely different in nature, the Minister said.
“The TP$90 million paid by the two former Prime Ministers to Tongasat were made unlawfully and without Cabinet’s knowledge,” he said in Tongan.
He said the TP$90 million paid to Tongasat was apparently paid secretly.
If the Tongan currency had been stronger, the TP$74 million loss could have become a profit.
The Minister said the TP$74 million had yet to be paid.
It was an adjustment made so the auditor could create a balance sheet based on Tonga’s own currency.
The main points
- A TP$74 million government loss in the Auditor General’s report to Parliament last week on the government’s 2017 accounts was caused by the high foreign exchange rates, Minister of Finance Pōhiva Tu’i’onetoa said.
- Tu’i’onetoa, a former Auditor General, said the loss could become a profit next year if the Tongan currency traded more strongly against foreign currencies.
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