The office of the Prime Minister wishes to clarify that the recent decision by the Cabinet to withdraw the Government’s support towards the hosting of the 2019 Pacific Games has been based on an economic and fiscal impact analysis recently conducted by the World Bank at the request of the Tongan Government. The World Bank report is not an official report for publication but was intended only for the attention of the requesting Government. The World Bank regularly provides economic advice to the Government of Tonga at their request, including response to key development issues. Specific questions about Government decisions is at the sole discretion of the Government.
The office of the Prime Minister therefore wishes to clarify that the World Bank’s economic and fiscal impact analysis of hosting the games in 2019, concluded that the Government is dependent on budget support, but it is not sufficient to maintain current levels of recurrent expenditure for basic operations. Cuts in basic expenditure and services are already likely over the next few years. The required games expenditure is well beyond the capacity to fund from domestic sources or known grant funding. Borrowing is not an option. The required cuts to recurrent expenditure and priority projects (if development partners were agreeable which is not certain) would severely undermine other top priorities in the TSDF and the quality of service delivery in Tonga. This would also threaten progress towards the MDG’s. Further, an attempt to move from a prudent fiscal stance with the objective of moving towards a sustainable fiscal path would invalidate the basis on which budget support is being provided. A loss of budget support of some T$100 million over this period could well follow. The government service could not handle this disruption, on top of the shift in expenditure from core functions to the games preparations. Substantive redundancies and expenditure cuts would be required to avoid a financial crisis but would create a serious social and political crisis.
As a result the economic analysis of the World Bank recommended to Government that in order to avoid serious fiscal problems, there is only a very limited option under which continuing with the games is feasible.
As a consequence of the World Bank’s analysis the Government is of the view that ever since Tonga was awarded the rights to host the games back in 2012, it is now five years and there is still no major investments being raised outside of Government. It is only conceivable to host the games if the Government can be guaranteed that all of the funding can be found from sources outside of the domestic budget, and that most of it will be from new aid sources.
Most important is that international evidence provided by the World Bank suggests that Tonga should not expect major positive economic impact from hosting the Pacific Games. International evidence further shows that specialized investments (such as stadiums and aquatic complexes) are poor investments. They do not generate sufficient returns to justify their existence during the short period of events.
The Government has considered all available options before it was able to reach a very difficult decision to withdraw its support from hosting the games in 2019. Tonga will be no lesser as a nation for not hosting. But what we need to do in going forward, is understand that a mirror was held to the sporting face of our nation and it was not a good reflection and has not been for a very long time. The lesson here is to own that fact and those of us who have held the wheel will need, to be honest with ourselves.
(For more information, please contact Po’oi Pohiva, PMO; 24 644)