Tonga’s Parliament has unanimously passed a record-breaking national budget of TOP 992.8 million for the 2025/26 financial year, set to take effect on 1 July 2025.
The largest budget in the nation’s history includes TOP$748.9 million in direct government spending and TOP$243.9 million in in-kind donor support.
Notably, it also features a projected deficit of TOP$29.1 million, which Finance Minister Dr ‘Aisake Eke defended as a necessary measure to address Tonga’s stagnant economy and spur long-term development.
Investing Through Deficit
Dr Eke outlined three possible approaches to budgeting—surplus, balanced, or deficit—and explained that the deficit was chosen to create profitable financial activities and stimulate growth.
According to the Parliamentary Hansard of 16 June 2025, he stated in Tongan: “Ko e me’a ko e patiseti ko e me’a ‘e 3 te ke ala fai: te ke fakapalanisi, pē te ke surplus, pē te ke hanga ‘o fakafe’amokaki.”
To cover the deficit, the government will secure a $43 million bond, with $13 million earmarked for bond repayments in the upcoming fiscal year and the remaining $30 million directed toward the private sector through an emerging domestic bond market.
He previously claimed no government had implemented it as a policy.
Dr Eke said his $30 million market bond policy is a trial initiative aimed at facilitating fish imports from Fiji. He stated that fish from Fiji would be affordable and would help reduce health issues in Tonga caused by meat consumption.
He had warned that failure in the initiative would lead to its discontinuation and a search for alternatives. His parliamentary remarks revealed the broader goal: to establish a private sector-sustained financial mechanism for economic growth.
His policy is part of a broader strategy to inject vitality into the economy, with key allocations targeting infrastructure upgrades, renewable energy projects, and a newly established Community Road Maintenance Fund.
The latter will provide TOP 100,000 to each of Tonga’s 17 constituencies, ensuring local road maintenance and community development.
Deficit Sparks Debate
The deficit budget, however, has not been without controversy. Last week, the former Minister of Infrastructure raised concerns in Parliament about the legality of the $43 million bond and the decision to run a deficit.
Dr Eke responded by saying that budgets are crafted using economic tools referred to as “macroeconomic management”. Additionally, the National Reserve Bank utilises different tools to regulate activities within the banking sector.
Considering these factors, he ultimately concluded that a deficit budget was the appropriate approach.
With the budget now approved, the government’s next steps include annual constituency visits in July 2025 to engage with communities on budget priorities, followed by a general election in November.
