IMF Staff Completes 2024 Article IV Mission to Timor-Leste

IMF News, October 8, 2024

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Growth is expected to rise in 2024, supported by an increase in public spending and strong credit growth.
Growth "will maintain its momentum in 2025."
Inflation: "From a high level in 2023, inflation has fallen sharply and is projected to continue easing with the moderation of global food prices."
IMF staff assessment: "Risks to the outlook are balanced."

IMF staff view: "A key policy priority is ensuring that Timor-Leste’s substantial savings are best utilized to support development while achieving fiscal sustainability."
Fiscal structure assessment:
- The draft 2025 budget "contains an appropriate increase in spending on capital projects, health, and education, but also an excessive increase in recurrent spending."
- "Large fiscal deficits are expected to persist as spending remains high, requiring excess withdrawals from the Petroleum Fund that will lead to its full depletion by the end of the 2030s."
IMF recommendation: adopt a "10-year reform scenario that supports economic diversification through structural reforms and gradually reduces fiscal deficits to stabilize the Petroleum Fund."
Policy emphasis: "Improving the composition and quality of public spending would boost growth, while containing overall spending is needed to preserve fiscal sustainability."

IMF staff: "Promoting private sector development requires well-sequenced structural reforms, and the authorities are rightly prioritizing an ambitious agenda of legal reforms of the financial sector."
Specific recommendation: "We recommend accelerating the issuance of land titles, which would offer a crucial source of collateral to households and businesses seeking credit from banks."
IMF support: "The IMF stands ready to continue providing capacity development to assist the government’s development and reform efforts."

Mission leader: Mr. Yan Carrière-Swallow.
Visit dates: "September 25-October 8" (to conduct discussions for the 2024 Article IV consultation).
IMF team engagements: meetings with Prime Minister Kay Rala Xanana Gusmão, Minister of Finance Santina Cardoso, Central Bank Governor Hélder Lopes, other senior officials, development partners, the private sector, and civil society.
Statement: Views expressed are those of IMF staff and "do not necessarily represent the views of the IMF’s Executive Board." Staff will prepare a report for presentation to the IMF's Executive Board, subject to management approval.

Source: Press Release No. 24/360 — IMF Staff Completes 2024 Article IV Mission to Timor-Leste (October 8, 2024).