How Tonga is Tackling Poverty Amid Crisis: Insights from the World Bank's 2024 Report

This article explores Tonga's ongoing fight against poverty, highlighted in the Tonga Poverty and Equity Assessment 2024 by the World Bank. Despite economic setbacks from natural disasters and global crises, the report shows how increased remittances and targeted social policies have helped reduce poverty. It delves into the challenges and recommendations for sustainable development and poverty alleviation in this vulnerable island nation.

In the face of ongoing economic turbulence, the World Bank’s Tonga Poverty and Equity Assessment 2024 sheds light on how Tonga is making strides against poverty, despite relentless challenges. From natural disasters to the economic repercussions of COVID-19, this small island nation faces numerous hurdles. Yet, key findings from the report reveal significant progress in poverty reduction, underscoring the pivotal roles of remittances, improved social support, and strategic investments in resilience.

Economic Hurdles and Recent Setbacks

Tonga’s growth has been historically limited by its remote location and small population size, factors common among Pacific Island nations. But in recent years, a series of unexpected events—including multiple tropical cyclones, the COVID-19 pandemic, inflationary pressures, and the Hunga Tonga-Hunga Ha’apai volcanic eruption—have created further strain on the economy. According to the report, these crises could have reversed progress if not for certain resilience factors built into the economy.

The World Bank report notes that Tonga’s GDP growth has lagged behind that of other Pacific Island countries, compounded by the nation’s reliance on imports and vulnerability to global market fluctuations. The economic effects have been visible in households nationwide, particularly those in isolated regions like ‘Eua and Ongo Niua, where poverty rates remain high.

A Decrease in Poverty, Despite the Odds

The World Bank’s findings show that Tonga’s poverty rate decreased from 27.4% in 2015/16 to 20.6% in 2021. This drop spans both urban and rural regions, with even rural areas benefiting from increases in household consumption and access to basic services. This progress, however, isn’t uniform; significant disparities persist across regions, with poverty rates highest in the more remote and economically isolated islands.

One of the report’s striking conclusions is that this poverty reduction occurred despite reduced employment opportunities, emphasizing that the growth of remittances from Tongans working abroad was a primary driver of economic stability.

Remittances: A Crucial Lifeline for Tongan Households

Remittances have emerged as a lifeline for Tongan families, representing nearly 90% of households, with 40% considering it their primary income source. These remittances largely stem from temporary labor programs in Australia and New Zealand, and without this financial flow, Tonga’s poverty rate would likely be 5-10 percentage points higher. For many families, these funds provide essential income for daily living and emergency needs, contributing to a vital reduction in poverty.

However, the report highlights the challenges of an economy heavily reliant on remittances. The volatility of global economic conditions, coupled with exchange rate shifts, can pose risks. This reliance also raises concerns about labor shortages in Tonga, as many workers, particularly men, migrate to secure better income opportunities abroad.

Vulnerabilities to Natural Disasters

The World Bank emphasizes that Tonga’s geographical position makes it extremely susceptible to natural hazards, including tropical cyclones, volcanic eruptions, and tsunamis. These disasters place the entire population at risk and disproportionately affect poorer households engaged in subsistence farming or informal work, who often lack the means to recover quickly.

The report’s findings suggest that developing more robust disaster preparedness strategies is critical. By investing in resilient infrastructure and climate adaptation, Tonga could reduce the impact of these events on its most vulnerable populations. Resilient structures and secure access to essential services like clean water, electricity, and healthcare are essential components of building sustainable livelihoods in Tonga’s high-risk environment.

Strengthening Social Protection for Sustained Poverty Reduction

While Tonga has expanded its social assistance programs, they remain limited in both reach and benefit size. The report outlines that existing social protection programs do not significantly reduce poverty. However, the National Social Protection Policy (2023-2033) aims to improve coverage and support levels, focusing on adaptive social protection (ASP) systems that can respond to shocks.

By providing rapid assistance during crises, ASP programs offer a more sustainable safety net for those living in or at risk of poverty. These programs will require robust financial support and careful planning to ensure they are ready to deploy in times of need.

Recommendations: A Path to Resilience and Sustainable Growth

To build on the progress already made, the Tonga Poverty and Equity Assessment 2024 recommends a multi-pronged approach to address the structural challenges facing Tonga’s economy:

Strengthening Disaster Preparedness and Climate Adaptation: By investing in resilient infrastructure and climate adaptation, Tonga can mitigate the severe impacts of natural disasters on vulnerable communities. Diversifying income sources to reduce dependency on agriculture is another critical step toward building economic resilience.

Expanding Social Protection Programs: Establishing adaptive social protection systems will help Tonga respond more effectively to economic and environmental shocks, safeguarding the well-being of its most vulnerable citizens.

Optimizing Human Capital: The report stresses the need for educational and vocational improvements that align with market demands. Programs that promote digital literacy and technical skills can prepare Tongans, especially women and youth, for higher-paying jobs both locally and abroad.

Maximizing Remittance Impact: While remittances play a vital role in poverty alleviation, the report advises that labor migration programs should balance the workforce needs of the local economy. Reducing remittance transfer fees and expanding financial literacy can further enhance the benefits of these funds for household stability and growth.

As Tonga navigates an uncertain future, the report by the World Bank underscores the need for an adaptable, resilient approach to tackling poverty and inequality. By bolstering support systems, expanding social protection, and prioritizing disaster resilience, Tonga can lay a foundation for sustainable economic growth and a stable future for its people.