Historical Sketch

Tongan state structures date to the 10th century when a first monarchy under the Tu'i Tonga was established. The central state dissolved and was succeeded by rivalling states which were re-united in 1845 following a 50-years civil war. In 1875, the Polynesian monarchy was reformed into the Kingdom of Tonga in a European style. The Dutch navigator Willem Schouten was the first European to visit Tonga in 1616, followed by others including James Cook in 1773, who coined the name "Friendly Islands". Tonga escaped European colonization until 1900 when it got placed under a British protectorate. Tonga regained independence in 1970.

Monetary History Overview

In 1875, kingship after the European model was introduced in Tonga, where a centralized government had been established only ten years before. In 1900, Great Britain established a protectorate the left the Tongan monarchy formally in place. British accounting was introduced in 1906, and British and Australian currency was declared current. In 1921, the government began issuing paper money. The Tongan Pound was at par with the Pound Sterling. In 1931, Australia devalued its currency by 20% against the Pound Sterling. Between 1946 and 1950, the Tongan Pound formally repegged to the Sterling, introducing a tiny 0.2% devaluation against the Australian Pound. Apart from that, Tonga followed the monetary development of Australia. Tonga decimalized its currency in 1967, a year after Australia, introducing the Tongan Pa'anga at half a Pound. The Tongan independence of 1970 did not change the monetary policy. In 1989, the National Reserve Bank of Tonga took over from the currency commission. The parity with the Australian Dollar was maintained until February 1991. After the floating of the exchange rate, the Pa'anga fluctuated around parity with the Australian Dollar, but anchored at the US Dollar since the early 2000s, rather than to follow the appreciation of the Australian currency.

Tonga joined the International Monetary Fund (IMF) on 13.09.1985.

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