Democratic Republic of Timor-Leste: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of Timor-Leste
IMF Staff Country Reports, February 27, 2024
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- Democratic Republic of Timor-Leste: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of Timor-Leste
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Bibliographic details
- Published: February 27, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400269660.002
Key assessment and context
- Timor-Leste has made impressive progress since independence in 2002 but remains a fragile post-conflict nation with pressing development needs.
- Oil and gas production has recently come to a halt, creating an urgent need to diversify the economy and develop the private sector.
- Discussions focused on ensuring that Timor-Leste’s substantial savings are best utilized to support development objectives while achieving fiscal sustainability.
Fiscal policy, public finances, and macro framework
- Public expenditure should be reduced to align it with the economy’s absorptive capacity.
- The quality of public spending should be improved, including by further prioritizing spending on human and physical capital.
- Domestic revenue should be gradually mobilized.
- A medium-term fiscal framework should underpin these efforts by setting a clear roadmap to fiscal sustainability.
Private sector development and structural reforms
- To develop a vibrant private sector, Timor-Leste should undertake an ambitious agenda of reforms.
- Structural reforms should remove bottlenecks in the agriculture and tourism sectors.
- Foster digitalization to boost productivity.
- Address legal constraints that hinder business operations and financial development.
Strategic priorities and policy recommendations (concise)
- Utilize substantial savings to support development while preserving fiscal sustainability.
- Reduce and reprioritize public expenditure toward human and physical capital.
- Mobilize domestic revenue gradually to reduce reliance on nonrenewable resource wealth.
- Establish and implement a medium-term fiscal framework as a clear roadmap to fiscal sustainability.
- Implement structural reforms to diversify the economy: agriculture, tourism, digitalization, and legal/financial sector reforms to enable private-sector-led growth.
Source: Democratic Republic of Timor-Leste: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of Timor-Leste
Content in this bundle
- The Impact of Fiscal Policy on Growth in Timor-Leste