Reserve Bank says there is ‘nothing new’ in Foreign Exchange Act vetted by IMF

'Oku taupotu 'i lalo 'a e fakamatala faka-Tonga kakato ki he ongoongo ko 'eni'

Tonga’s National Reserve Bank said today there was nothing new in the Foreign Exchange Control Act, which was introduced last year.

The FEC Act 2018 applies to foreign exchange transactions after November 1, 2018.

The Reserve Bank said the Act authorised it to manage the country’s foreign exchange and was not intended to violate anybody’s Constitutional right to their property or money in Tonga.

However, it said that if somebody chose to convert, transfer or dispose of their property or money in exchange for foreign currency, they would forfeit that right and would be to the exchange control directive issued under the Act. 

The Reserve Bank said the Act had been introduced after extensive discussion with exports and government authorities and had been vetted by the International Monetary Fund.

It said the Bank needed to have appropriate legislation to ensure that what it called “a reasonable amount” of export proceeds were returned to the kingdom.

Some businesses have claimed the new law, which went into effect last year, would damage their businesses.

Radio New Zealand described the legislation as allowing the government to force local business people to repatriate their foreign assets to Tonga, including forcing them to sell their property overseas.

Pacific Sunrise Fishing’s co-owner Eddie Palu, said the company would cut back its operations because of the policy.

The company is the kingdom’s only deep sea fish exporter and operates six vessels.

Earlier this month, Finance Minister, Pōhiva Tu’ionetoa said he was willing to talk to business owners concerned about the new law.

Hon. Tu’ionetoa said the act was intended to ensure Tonga had sufficient foreign reserves.

He said the act required that up to 60 percent of profits should be repatriated.

Mr Tu’ionetoa said previously many exporters did not  bring the earnings back into the country.

Former Finance Minister ‘Aisake Eke said the government should re-think the legislation.

The main points

  • Tonga’s National Reserve Bank said today there was nothing new in the Foreign Exchange Control Act, which was introduced last year.
  • The FEC Act 2018 applies to foreign exchange transactions after November 1, 2018.
  • The Reserve Bank said the Act authorised it to manage the country’s foreign exchange and was not intended to violate anybody’s Constitutional right to their property or money in Tonga.

For more information

Tonga minister open to discuss controls over foreign exchange

https://www.radionz.co.nz/international/pacific-news/380170/tonga-minister-open-to-discuss-controls-over-foreign-exchange

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