Tonga

Stepping Up Immediate Support to Tonga After a “Once in a Millennium” Natural Catastrophe

The 2022 eruption of Tonga’s Hunga Tonga-Hunga Ha’apai undersea volcano and subsequent tsunami caused over $90 million in damages impacting approximately 85,000 Tongans (85 percent of the country’s population). Within 24 hours of receiving the government’s request, the World Bank provided an immediate delivery of $8 million in funding through the contingent financing instrument (Catastrophe Deferred Drawdown Option - Cat-DDO) to support Tonga’s immediate response needs.

Beneficiaries

“We have been moved by the support shown to Tonga and to our people from our friends in the Pacific and across the globe, to assist with our nation’s response and recovery.”Tongan Minister of Finance, the Hon. Tatafu Moeaki.

The project supported critical reforms in the disaster risk management sector, including a revised disaster risk management legislation on proactive risk reduction; and a new disaster risk financing strategy to inform the government’s decision-making on post-disaster financing instruments. The drawdown of the Cat-DDO supported the government’s immediate emergency response to the Hunga Tonga-Hunga Ha’pai event.

Challenge

The Kingdom of Tonga is one of the world’s most vulnerable countries to climate and disaster risk. The January 15, 2022, eruption of the undersea volcano Hunga Tonga-Hunga Ha’apai, followed by a devastating tsunami, demonstrated this vulnerability – considered a “once in a millennium” event. This natural disaster completely cut off telecommunications service to the island nation, and caused over $90 million in damages.

The larger challenge facing Tonga was one of persistent vulnerability to natural disasters, with Tonga being hit by three devastating cyclones in the last decade, the most recent of which, Cyclone Harold, in 2020, caused an estimated $111 million in damages.

Approach

A hybrid operation was put in place to strengthen Tonga’s resilience shortly before the Hunga Tonga eruption. This approach combined a Development Policy Operation (DPO) with a Catastrophe-Deferred Drawdown Option (Cat-DDO), which provides contingent financing to governments to respond to natural disasters and enhance resilience to climate change.

This approach supported the government of Tonga to: strengthen public finances; enhance resilience to climate change, natural disasters, and health-related risks; and support economic recovery and improved access to job opportunities.

Results

The delivery of an immediate $8 million in emergency funding in January, 2022 was vital for the Tongan government’s immediate response to the eruption and tsunami. The project strengthened Tonga’s resilience to natural and climate-related risks by supporting the country’s first Disaster Risk Financing Strategy. It also facilitated a significant reform of disaster risk management legislation to enhance more proactive risk reduction and preparedness. This program represented a continuation of reforms for fiscal sustainability, climate and disaster resilience, employment opportunities, and financial sector development.

The operation supported the following policy reforms, which sought to lay the groundwork for future crisis preparedness:

  • The program facilitated the adoption of a new medium-term debt management strategy, a policy on government guarantees, and tighter controls on public-sector wage bill spending;
  • The program supported rollout of the COVID-19 vaccine. By early April 2022, Tonga has fully vaccinated 90 percent of the eligible population;
  • The program facilitated the passage of a new national Disaster Risk Management Bill, and a national disaster risk financing policy, both of which have been approved by Cabinet;
  • The program promoted stronger labor mobility to enable more Tongans to access work in neighboring countries Australia and New Zealand by establishing work ready pools, reforming procedures for recruitment, and enhanced pre-departure training
  • The program facilitated the passage of a new Credit Union Act that will strengthen financial sector stability, protect customers, and encourage expansion in financial services.
  • Adoption of the nation’s first sexual harassment policy for Tonga’s public service.

Bank Group Contribution

The World Bank, through the International Development Association (IDA), provided $19 million, comprising a $11 million DPO and a $8 million Cat-DDO. The Global Facility for Disaster Reduction and Recovery approved $550,000 in grant financing, part of which will contribute to the implementation of key reforms supported by the project.

The hybrid approach used to support Tonga was specifically designed for small countries that were highly exposed to natural hazards; with immediate budget support addressed through the DPO while the Cat-DDO provides financing to support resilience to climate change immediately after a catastrophic event. Combining these multiple functions reduced duplication in preparation efforts, while ensuring that resilience work was a central part of project design.

Partners

Tongan government partners included the Ministry of Finance, Ministry of Internal Affairs, Ministry of Health, Ministry of Revenue and Customs, Ministry of Trade and Economic Development, Public Service Commission, National Emergency Management Office, and Ministry of Infrastructure. In addition, the World Bank worked closely with other development partners, including the Asian Development Bank, European Union, Australia, and New Zealand.

Looking Ahead

Tonga’s government has announced a Recovery and Resilience Building Plan for the Hunga Tonga-Hunga Ha’apai disaster that calls for $240 million in recovery needs and focuses on four priority sectors: Housing Recovery, Food Security and Livelihoods, Tourism Industry, and Public Infrastructure. The World Bank will continue to support Tonga’s longer-term recovery from the catastrophic event, with further support to be announced in the coming months.

The World Bank, in collaboration with other partners including the Australian and New Zealand governments, Asian Development Bank and European Union, will continue to support the government of Tonga on the implementation of all reforms supported by this project.