The prime minister, ‘Akilisi Pohiva, said the cabinet made the decision to pull out on Friday, on the basis of a 2013 World Bank report about the economic impact of the event.
Mr Pohiva said he intended to write a letter to the Pacific Games Council informing them of the decision.
Council president Vidhya Lakhan said there may be a small funding shortfall but plans are already in place to address that.
“There are two projects that we had requested the government, through the organising committee, to put in place,” he said.
“One of them they did, there is some revenue coming into the games organising committee through foreign exchange.
“And the other one I can’t talk about it because it is still in the pipeline but with those two projects we would be able to raise a substantial amount of money that we need.”
Mr Lakhan said human resources and very little monetary contribution are required from the government.
“There are other things we could do to make the games affordable for Tonga, to ensure that it stays in Tonga,” he said.
“So that would be our first option, if we can’t have the full complement of the games and if we cut some corners and downsize a little bit, whether we could keep the games in Tonga.
“That’s another option but at the moment we’re not looking at those options because we feel pretty confident that we will be able to keep the games in Tonga, even if the Tongan government withdraws (from the host agreement).”