IMF Staff Complete 2025 Article IV Mission to Timor-Leste

IMF News, July 2, 2025

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IMF team led by Mr. Yan Carrière-Swallow visited Dili during June 19-July 2 to conduct discussions for the 2025 Article IV consultation with Timor-Leste.
End-of-Mission press releases convey preliminary findings; 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 based on these preliminary findings that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Growth is expected to remain robust at 3.9 percent in 2025, supported by fiscal expansion and strong credit growth.
Growth is projected to moderate to 3.3 percent in 2026.
Inflation is expected to average 0.9 percent in 2025 and to rise to 1.8 percent in 2026.
Inflation had fallen sharply last year as global food and energy prices declined but is expected to increase moderately as global food prices rise.
Risks to the outlook are balanced.

Timor-Leste’s financial buffers and favorable demographics provide an opportunity to develop the economy, but the economy remains under-diversified and fiscal and external imbalances are large.
Absent further reforms, deficits are projected to remain large over the medium term, which would lead to a full depletion of the Petroleum Fund by the end of the 2030s.
To preserve fiscal sustainability while supporting development, the IMF recommends a 10-year reform agenda of structural and fiscal reforms to support private sector development and gradually reduce fiscal deficits.

The 2026 budget should prioritize high-quality spending on physical and human capital, including health and education, while containing recurrent expenditure.
The government should focus on identifying measures to contain the public sector wage bill, which has grown sharply in recent years.
The government is implementing a Value Added Tax by January 2027.
For 2026, IMF staff propose reforms consistent with an expenditure envelope of around US$1.85 billion for central government.

Continue and implement financial sector reforms, including:
- an insolvency framework,
- a secure transactions law,
- development of corporate accounting standards,
- a new law on banking activities.
Accelerate issuance of land titles and establish a national digital ID system to:
- boost access to credit,
- diversify the private sector,
- improve the efficiency of public spending.
Implementation of these financial and fiscal reforms would accelerate private sector development and make public expenditure more efficient.

The IMF team held discussions with Minister of Finance Santina Cardoso, Central Bank Governor Hélder Lopes, other senior officials, the private sector, civil society, and development partners.
The IMF stands ready to continue providing capacity development to assist the government’s operations and reform efforts.

IMF Communications Department — Press Release No. PR25/232, July 2, 2025.