{
  "title": "Public Information Notice: IMF Executive Board Concludes 2010 Article IV Consultation with the Democratic Republic of Timor-Leste",
  "publication": "IMF News, March 8, 2011",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1131",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2011-03-08",
  "sections": [
    {
      "heading": "Background",
      "content": "- Timorese economy grew fast over the past three years in an environment of improved security following the 2006 civil unrest.\n- Non-oil growth averaged 11 percent during 2007–09, driven by higher oil-financed public spending and a rebound in agriculture from the 2007 drought.\n- World Bank estimate: poverty incidence declined from 50 percent in 2007 to 41 percent in 2009.\n- Domestic price pressures have recently been rising and are particularly high in some segments of the economy, such as housing and construction.\n- Fiscal developments:\n  - Non-oil fiscal deficit declined by 17 percentage points to 92 percent of non-oil GDP in 2009.\n  - Spending growth moderated to 8 percent in 2009 after a 130 percent increase in 2008.\n  - Supplemental 2010 budget raised the spending envelop by more than 30 percent to US$838 million, to be financed by withdrawals of US$811 million from the Petroleum Fund (PF).\n  - Due to procurement delays actual public spending is expected to be around US$729 million, and the non-oil fiscal deficit is projected at about 100 percent of non-oil GDP.\n- Oil dependency and external position:\n  - In 2009, petroleum income accounted for about 95 percent of total government revenue and almost 80 percent of gross national income (GNI).\n  - PF assets reached US$6.8 billion or about ten times non-oil GDP in October 2010.\n  - Current account surplus driven by large oil income.\n- Financial sector:\n  - Remains at an embryonic stage: three foreign bank branches dominate, plus a small state-owned microfinance institution; first insurance company established.\n  - High bank deposit growth but private sector credit stagnant due to large share of non-performing loans, weak contract enforcement, and unclear property rights.\n- Near-term outlook and risks:\n  - Preliminary data from authorities indicate GDP growth in 2010 likely higher than the staff report estimate of 6 percent and closer to the government’s estimate of 9½ percent.\n  - Inflation projected to increase from 4½ percent to 6 percent in 2011, higher than the average of neighboring countries.\n  - Large uncertainties: path of oil prices and production, magnitude and quality of public spending, and progress in business-enabling structural reforms."
    },
    {
      "heading": "Executive Board Assessment (findings and policy recommendations)",
      "content": "- Findings:\n  - Directors welcomed Timor-Leste’s economic performance over the last three years and progress on poverty reduction and other social indicators.\n  - Medium-term outlook for growth is positive following a slowdown caused by adverse weather.\n  - Timor-Leste is highly oil-dependent; key challenge is using petroleum wealth wisely to build a strong non-oil economy and raise living standards.\n- Fiscal and spending guidance:\n  - Carefully selected infrastructure investment could have sufficiently high returns to justify temporary withdrawals from the PF in excess of the estimated sustainable income (ESI).\n  - Upward revision in the ESI has created room for additional capital expenditure.\n  - Most Directors observed that spending at a slower-than-planned pace, consistent with absorptive capacity, would better realize high-quality projects and crowd in private investment.\n- Public financial management and institutional arrangements:\n  - Praise for government emphasis on improving planning, evaluation, and implementation of spending programs to avoid overwhelming administrative capacity.\n  - Support for plans to create a new agency, reporting directly to the Prime Minister, to be in charge of major project evaluation and approval.\n  - Further improvements in public financial management and budget execution considered important.\n- Structural and financial sector reforms:\n  - Welcomed efforts to make the regulatory environment more business-friendly; introduction of a one-stop-shop for start-ups noted as a step forward.\n  - Accelerated reforms to enhance property rights (such as the pending land law) would ease credit extension by the financial sector.\n- Macroeconomic policy stance:\n  - Official dollarization has helped keep inflation under control and should be maintained, supported by a fiscal policy mindful of external stability.\n  - Productivity-enhancing structural reforms and efforts to build labor skills would improve competitiveness in non-oil industries and services.\n  - A slower-than-envisaged pace of public spending growth would help contain inflation pressures as supply-side limitations are approached.\n- Engagement with the IMF:\n  - Directors called for intensified engagement between Fund staff and the authorities.\n  - Noting differences between official and the more conservative staff’s growth projections, Directors encouraged closer policy dialog and greater use of technical assistance, including to strengthen Timor-Leste’s economic statistics.\n  - A number of Directors saw merit in reopening the resident representative office."
    },
    {
      "heading": "Selected Economic Indicators (highlights from table, 2005–11)",
      "content": "- GNI at current prices (US$ million): 695 (2005); 972 (2006); 1,689 (2007); 2,851 (2008); 2,401 (2009); 2,704 (2010 Prel.); 3,019 (2011 Proj.).\n- Non-oil GDP at current prices (US$ million): 332 (2005); 327 (2006); 358 (2007); 444 (2008); 556 (2009); 627 (2010 Prel.); 708 (2011 Proj.).\n- Real non-oil GDP growth (percentage change): 6.2 (2005); -5.8 (2006); 9.1 (2007); 11.0 (2008); 12.9 (2009); 6.1 (2010 Prel.); 7.3 (2011 Proj.).\n  - Including United Nations 1/: 2.3 (2005); -3.4 (2006); 18.2 (2007); 10.6 (2008); 5.0 (2009); (2010 Prel. blank in table).\n- Inflation (CPI, percentage change, end-period): 1.0 (2005); 6.7 (2006); 7.6 (2007); 1.1 (2008); 6.5 (2009); 6.0 (2010 Prel.); (2011 Proj. blank in table).\n- Inflation (CPI, percentage change, period average): 1.8 (2005); 4.1 (2006); 8.9 (2007); 0.1 (2008); 4.5 (2009); (2010–11 entries blank in table).\n- Investment-saving balance (In percent of non-oil GDP) — Gross investment 2/: 21 (2005); 23 (2006); 29 (2007); 63 (2008); 55 (2009); 48 (2010 Prel.); 70 (2011 Proj.).\n- Gross national savings (percent of non-oil GDP): 99 (2005); 188 (2006); 518 (2007); 301 (2008); 276 (2009); 267 (2010 Prel.); (2011 Proj. blank).\n- External savings (percent of non-oil GDP): -79 (2005); -166 (2006); -329 (2007); -456 (2008); -245 (2009); -227 (2010 Prel.); -197 (2011 Proj.).\n- Central government finances (percent of non-oil GDP):\n  - Revenues: 128 (2005); 205 (2006); 382 (2007); 551 (2008); 342 (2009); 338 (2010 Prel.); 334 (2011 Proj.).\n  - Domestic revenues: 11 (2005); 10 (2006); 12 (2007) (other years blank).\n  - Petroleum revenue: 107 (2005); 195 (2006); 367 (2007); 540 (2008); 328 (2009); 323 (2010 Prel.); (2011 Proj. blank).\n  - Expenditure (cash basis): 26 (2005); 32 (2006); 66 (2007); 120 (2008); 103 (2009); 100 (2010 Prel.); 123 (2011 Proj.).\n  - Recurrent expenditure: 19 (2005); 27 (2006); 51 (2007); 81 (2008); 65 (2009); 72 (2010 Prel.); 73 (2011 Proj.).\n  - Capital expenditure: 7 (2005); 5 (2006); 15 (2007); 39 (2008); 38 (2009); 28 (2010 Prel.); 50 (2011 Proj.).\n  - Overall balance: 102 (2005); 174 (2006); 316 (2007); 431 (2008); 239 (2009); 210 (2010 Prel.); (2011 Proj. blank).\n  - Non-oil fiscal balance: -5 (2005); -21 (2006); -51 (2007); -110 (2008); -92 (2009); -89 (2010 Prel.); -113 (2011 Proj.).\n- Combined sources fiscal operations 3/ (percent of non-oil GDP) — selected entries: Domestic revenue and budget grants 24 (2005); 13 (2006); 17 (2007). Expenditure 67 (2005); 98 (2006); 163 (2007); 144 (2008); 133 (2009); 154 (2010 Prel.); 47 (2011 Proj.) (table contains more detailed rows).\n- Money and credit: Broad money (end-period) 4/: 31 (2005); 40 (2006); 43 (2007); … (2008 onward blank in table). Net domestic assets (end-period): -24 (2005); -3 (2006); -48 (2007); -42 (2008); -30 (2009).\n- External sector (In millions of U.S. dollars): Current account: 261 (2005); 541 (2006); 1,177 (2007); 2,023 (2008); 1,363 (2009); 1,425 (2010 Prel.); 1,395 (2011 Proj.).\n  - Merchandise exports 2/: 8 (2005); 9 (2006); 14 (2007) (other years blank).\n  - Merchandise imports: 112 (2005); 101 (2006); 176 (2007); 311 (2008); 385 (2009); 575 (2010 Prel.); 802 (2011 Proj.).\n- Memorandum item:\n  - Petroleum Fund balance (percent of non-oil GDP) 5/: 310 (2005); 583 (2006); 945 (2007); 968 (2008); 1,076 (2009); 1,169 (2010 Prel.). (Figure for 2004 in source refers to Timor-Sea account.)\n\nPublic Information Notice (PIN) No. 11/31, March 8, 2011.\n\n---\n\n Content in this bundle\n\n- Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Democratic Republic of Timor-Leste and the IMF\n- Public Information Notices\n- Adobe Acrobat Reader\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1131"
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    "Published: March 8, 2011",
    "Timorese economy grew fast over the past three years in an environment of improved security following the 2006 civil unrest.",
    "Non-oil growth averaged 11 percent during 2007–09, driven by higher oil-financed public spending and a rebound in agriculture from the 2007 drought.",
    "World Bank estimate: poverty incidence declined from 50 percent in 2007 to 41 percent in 2009.",
    "Domestic price pressures have recently been rising and are particularly high in some segments of the economy, such as housing and construction.",
    "Fiscal developments:",
    "Oil dependency and external position:",
    "Financial sector:",
    "Near-term outlook and risks:",
    "Findings:",
    "Fiscal and spending guidance:",
    "Public financial management and institutional arrangements:",
    "Structural and financial sector reforms:",
    "Macroeconomic policy stance:",
    "Engagement with the IMF:",
    "GNI at current prices (US$ million): 695 (2005); 972 (2006); 1,689 (2007); 2,851 (2008); 2,401 (2009); 2,704 (2010 Prel.); 3,019 (2011 Proj.).",
    "Non-oil GDP at current prices (US$ million): 332 (2005); 327 (2006); 358 (2007); 444 (2008); 556 (2009); 627 (2010 Prel.); 708 (2011 Proj.).",
    "Real non-oil GDP growth (percentage change): 6.2 (2005); -5.8 (2006); 9.1 (2007); 11.0 (2008); 12.9 (2009); 6.1 (2010 Prel.); 7.3 (2011 Proj.).",
    "Inflation (CPI, percentage change, end-period): 1.0 (2005); 6.7 (2006); 7.6 (2007); 1.1 (2008); 6.5 (2009); 6.0 (2010 Prel.); (2011 Proj. blank in table).",
    "Inflation (CPI, percentage change, period average): 1.8 (2005); 4.1 (2006); 8.9 (2007); 0.1 (2008); 4.5 (2009); (2010–11 entries blank in table).",
    "Investment-saving balance (In percent of non-oil GDP) — Gross investment 2/: 21 (2005); 23 (2006); 29 (2007); 63 (2008); 55 (2009); 48 (2010 Prel.); 70 (2011 Proj.).",
    "Gross national savings (percent of non-oil GDP): 99 (2005); 188 (2006); 518 (2007); 301 (2008); 276 (2009); 267 (2010 Prel.); (2011 Proj. blank).",
    "External savings (percent of non-oil GDP): -79 (2005); -166 (2006); -329 (2007); -456 (2008); -245 (2009); -227 (2010 Prel.); -197 (2011 Proj.).",
    "Central government finances (percent of non-oil GDP):",
    "Combined sources fiscal operations 3/ (percent of non-oil GDP) — selected entries: Domestic revenue and budget grants 24 (2005); 13 (2006); 17 (2007). Expenditure 67 (2005); 98 (2006); 163 (2007); 144 (2008); 133 (2009); 154 (2010 Prel.); 47 (2011 Proj.) (table contains more detailed rows).",
    "Money and credit: Broad money (end-period) 4/: 31 (2005); 40 (2006); 43 (2007); … (2008 onward blank in table). Net domestic assets (end-period): -24 (2005); -3 (2006); -48 (2007); -42 (2008); -30 (2009).",
    "External sector (In millions of U.S. dollars): Current account: 261 (2005); 541 (2006); 1,177 (2007); 2,023 (2008); 1,363 (2009); 1,425 (2010 Prel.); 1,395 (2011 Proj.).",
    "Memorandum item:",
    "[Country Report (PDF)](/external/pubs/ft/scr/2011/cr1165.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Democratic Republic of Timor-Leste and the IMF](http://www.imf.org/external/country/TLS/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
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    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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