{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Timor-Leste",
  "publication": "IMF News, February 27, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Timor-Leste.",
  "publishDate": "2024-02-27",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Timor-Leste.\n- Press Release No. 24/59. Date: February 27, 2024."
    },
    {
      "heading": "Recent economic developments",
      "content": "- Non-oil real GDP growth reached 4 percent in 2022, driven by the post-pandemic re-opening and a strong fiscal expansion.\n- Growth is estimated to have slowed to 1½ percent in 2023 as difficulties in executing the budget surrounding the elections last May restrained public spending.\n- Inflation surged to above 8 percent in 2023 driven by food prices and transport costs, but fell to 4.3 percent (y/y) in January 2024."
    },
    {
      "heading": "Outlook and risks",
      "content": "- Growth is expected to recover to 3½ percent in 2024, supported by the government’s prioritization of public capital expenditure.\n- Inflation is expected to moderate further to 2½ percent by the end of this year given projected easing of global commodity prices.\n- Long-term growth is expected to remain around the pre-pandemic average of 3 percent, but policy actions could accelerate it.\n- Risks to the outlook are tilted to the downside:\n  - Near-term downside risks: an abrupt onset of a global recession and heightened commodity price volatility.\n  - Fiscal risks: such shocks could require a fiscal response, posing obstacles to expenditure restraint and adversely affecting the balance of the Petroleum Fund.\n  - Political and structural risks: uncertainty from public expenditure decisions; developing the Greater Sunrise oil field presents a large upside risk in the medium term."
    },
    {
      "heading": "Executive Board assessment and recommendations",
      "content": "- Directors noted the near‑term outlook has improved, with growth recovering and inflation easing in 2024.\n- Directors emphasized the need to ensure fiscal sustainability and support higher growth and development, while diversifying the economy.\n- Fiscal policy recommendations:\n  - Gradual fiscal consolidation to avoid a depletion of the Petroleum Fund and secure fiscal sustainability.\n  - Welcome prioritization of capital expenditure in the 2024 budget; further improving the quality of expenditure would support higher growth and protect the vulnerable.\n  - Gradual revenue mobilization; welcomed authorities’ commitment to introduce a VAT, to be complemented by measures to strengthen tax administration.\n  - Encourage adoption of a fiscal responsibility law and formulation of a medium‑term fiscal framework to put fiscal policy on a more sustainable path and help address external imbalances.\n- Financial sector recommendations:\n  - Directors noted systemic risks to the financial system are low; banking sector capital and liquidity levels remain sound.\n  - Encourage promoting financial deepening and inclusion by removing structural impediments to lending and developing digital financial services.\n  - Advance adoption of IFRS 9 and Basel III regulatory principles and address AML/CFT deficiencies.\n- Structural and social policy recommendations:\n  - Structural reforms to promote private sector development, diversify the economy, and support sustainable growth.\n  - Address bottlenecks in the agriculture and tourism sectors and foster digitalization.\n  - Continue efforts to strengthen governance and the rule of law.\n  - Prioritize human capital development, including improving education quality and strengthening vocational education and training to unlock the demographic dividend.\n  - Invest in climate‑resilient infrastructure given vulnerability to climate change and natural disasters.\n- Engagement and capacity development:\n  - Directors welcomed ongoing capacity development projects and concurred that continued engagement with the Fund, in the context of the Country Engagement Strategy, would help address root causes of fragility.\n  - Underscored importance of enhancing coordination across development partners."
    },
    {
      "heading": "Key statistics and projections (selected)",
      "content": "- Non-oil GDP at current prices (2022): US$1.672 billion\n- Population (2022): 1.332 million\n- Non-oil GDP per capita (2022): US$1,256\n- Quota: SDR 25.6 million\n\nTable: Selected indicators (2022–2025)\n- Real Non-oil GDP: 2022: 4.0; 2023 Est.: 1.5; 2024 Proj.: 3.5; 2025 Proj.: 3.2\n- CPI (annual average): 2022: 7.0; 2023 Est.: 8.4; 2024 Proj.: 2.2\n- CPI (end-period): 2022: 6.9; 2023 Est.: 8.7; 2024 Proj.: 2.5; 2025 Proj.: 2.0\n- Central government revenue (percent of Non-oil GDP): 2022: 57.3; 2023: 49.1; 2024: 45.8; 2025: 42.0\n- Domestic revenue (percent of Non-oil GDP): 2022: 10.3; 2023: 10.0; 2024: 10.1\n- Estimated Sustainable Income (ESI) (percent of Non-oil GDP): 2022: 35.7; 2023: 28.6; 2024: 26.4; 2025: 23.5\n- Expenditure (percent of Non-oil GDP): 2022: 115.5; 2023: 90.5; 2024: 88.3; 2025: 85.1\n  - Recurrent: 2022: 92.0; 2023: 67.9; 2024: 65.0; 2025: 62.6\n  - Net acquisition of nonfinancial assets: 2022: 12.1; 2023: 14.0; 2024: 14.1\n- Net lending/borrowing (percent of Non-oil GDP): 2022: -58.2; 2023: -41.4; 2024: -42.6; 2025: -43.1\n- Deposits (annual percent change): 2022: 8.6; 2023: 8.2; 2024: 7.3\n- Credit to the private sector (annual percent change): 2022: 34.5; 2023: 19.2; 2024: 7.1; 2025: 6.6\n- Lending interest rate (percent, end of period): 2022: 11.3\n- Current account balance (in millions of U.S. dollars): 2022: 273; 2023: -372; 2024: -832; 2025: -930\n  - (In percent of Non-oil GDP): 2022: 16; 2023: -20; 2024: -41.8; 2025: -43.4\n- Trade of Goods (in millions of U.S. dollars): 2022: -1,959; 2023: -1,234; 2024: -885; 2025: -939\n  - Exports of goods: 2022: -1,054; 2023: -346; 2024: 73; 2025: 83\n  - Imports of goods: 2022: 906; 2023: 887; 2024: 958; 2025: 1,022\n- Trade of Services (in millions of U.S. dollars): 2022: -150; 2023: -154; 2024: -181; 2025: -207\n- Primary Income (in millions of U.S. dollars): 2022: 2,452; 2023: 1,091; 2024: 316; 2025: 303\n  - of which: other primary income (oil/gas) 1/: 2022: 1,106; 2023: 409; 2024: 0; 2025: 0\n- Secondary Income (in millions of U.S. dollars): 2022: -69; 2023: -75; 2024: -81; 2025: -87\n- Overall balance (in millions of U.S. dollars): 2022: -102; 2023: -4; 2024: 79; 2025: 74\n- Public foreign assets (end-period) (in millions of U.S. dollars) 2/: 2022: 18,212; 2023: 18,331; 2024: 17,680; 2025: 17,112\n  - (In months of imports): 2022: 196; 2023: 198; 2024: 174; 2025: 156\n- Nominal Non-oil GDP (in millions of U.S. dollars): 2022: 1,672; 2023: 1,833; 2024: 1,992; 2025: 2,140\n- Nominal Non-oil GDP per capita (in U.S. dollars): 2022: 1,256; 2023: 1,357; 2024: 1,454; 2025: 1,540\n  - (Annual percent change): 2022: 5.5; 2023: 8.1; 2024: 5.9\n- Crude oil prices (U.S. dollars per barrel, WEO) 3/: 2022: 96; 2023: 81; 2024: 75\n- Petroleum Fund balance (in millions of U.S. dollars) 4/: 2022: 17,379; 2023: 17,503; 2024: 16,772; 2025: 16,130\n- Public debt (in millions of U.S. dollars): 2022: 1,039; 2023: 955; 2024: 842; 2025: 754\n  - (Public debt in percent of Non-oil GDP): 2022: 15.1; 2023: 15.0; 2024: 14.2; 2025: 14.5\n- Population growth (annual percent change): 2022: 1.6; 2023: 1.4\n\nNotes:\n- 1/ Oil sector activities are considered non-resident activities in balance of payments statistics.\n- 2/ Includes Petroleum Fund balance and the central bank's official reserves.\n- 3/ Simple average of UK Brent, Dubai, and WTI crude oil prices based on October 2023 WEO assumptions.\n- 4/ Closing balance.\n\nInternational Monetary Fund. Executive Board conclusion: Article IV consultation with Timor-Leste (Press Release No. 24/59), February 27, 2024.\n\n---\n\n\n References\n\n- Democratic Republic of Timor-Leste and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\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/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult"
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    "Published: February 27, 2024",
    "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Timor-Leste.",
    "Press Release No. 24/59. Date: February 27, 2024.",
    "Non-oil real GDP growth reached 4 percent in 2022, driven by the post-pandemic re-opening and a strong fiscal expansion.",
    "Growth is estimated to have slowed to 1½ percent in 2023 as difficulties in executing the budget surrounding the elections last May restrained public spending.",
    "Inflation surged to above 8 percent in 2023 driven by food prices and transport costs, but fell to 4.3 percent (y/y) in January 2024.",
    "Growth is expected to recover to 3½ percent in 2024, supported by the government’s prioritization of public capital expenditure.",
    "Inflation is expected to moderate further to 2½ percent by the end of this year given projected easing of global commodity prices.",
    "Long-term growth is expected to remain around the pre-pandemic average of 3 percent, but policy actions could accelerate it.",
    "Risks to the outlook are tilted to the downside:",
    "Directors noted the near‑term outlook has improved, with growth recovering and inflation easing in 2024.",
    "Directors emphasized the need to ensure fiscal sustainability and support higher growth and development, while diversifying the economy.",
    "Fiscal policy recommendations:",
    "Financial sector recommendations:",
    "Structural and social policy recommendations:",
    "Engagement and capacity development:",
    "Non-oil GDP at current prices (2022): US$1.672 billion",
    "Population (2022): 1.332 million",
    "Non-oil GDP per capita (2022): US$1,256",
    "Quota: SDR 25.6 million",
    "Real Non-oil GDP: 2022: 4.0; 2023 Est.: 1.5; 2024 Proj.: 3.5; 2025 Proj.: 3.2",
    "CPI (annual average): 2022: 7.0; 2023 Est.: 8.4; 2024 Proj.: 2.2",
    "CPI (end-period): 2022: 6.9; 2023 Est.: 8.7; 2024 Proj.: 2.5; 2025 Proj.: 2.0",
    "Central government revenue (percent of Non-oil GDP): 2022: 57.3; 2023: 49.1; 2024: 45.8; 2025: 42.0",
    "Domestic revenue (percent of Non-oil GDP): 2022: 10.3; 2023: 10.0; 2024: 10.1",
    "Estimated Sustainable Income (ESI) (percent of Non-oil GDP): 2022: 35.7; 2023: 28.6; 2024: 26.4; 2025: 23.5",
    "Expenditure (percent of Non-oil GDP): 2022: 115.5; 2023: 90.5; 2024: 88.3; 2025: 85.1",
    "Net lending/borrowing (percent of Non-oil GDP): 2022: -58.2; 2023: -41.4; 2024: -42.6; 2025: -43.1",
    "Deposits (annual percent change): 2022: 8.6; 2023: 8.2; 2024: 7.3",
    "Credit to the private sector (annual percent change): 2022: 34.5; 2023: 19.2; 2024: 7.1; 2025: 6.6",
    "Lending interest rate (percent, end of period): 2022: 11.3",
    "Current account balance (in millions of U.S. dollars): 2022: 273; 2023: -372; 2024: -832; 2025: -930",
    "Trade of Goods (in millions of U.S. dollars): 2022: -1,959; 2023: -1,234; 2024: -885; 2025: -939",
    "Trade of Services (in millions of U.S. dollars): 2022: -150; 2023: -154; 2024: -181; 2025: -207",
    "Primary Income (in millions of U.S. dollars): 2022: 2,452; 2023: 1,091; 2024: 316; 2025: 303",
    "Secondary Income (in millions of U.S. dollars): 2022: -69; 2023: -75; 2024: -81; 2025: -87",
    "Overall balance (in millions of U.S. dollars): 2022: -102; 2023: -4; 2024: 79; 2025: 74",
    "Public foreign assets (end-period) (in millions of U.S. dollars) 2/: 2022: 18,212; 2023: 18,331; 2024: 17,680; 2025: 17,112",
    "Nominal Non-oil GDP (in millions of U.S. dollars): 2022: 1,672; 2023: 1,833; 2024: 1,992; 2025: 2,140",
    "Nominal Non-oil GDP per capita (in U.S. dollars): 2022: 1,256; 2023: 1,357; 2024: 1,454; 2025: 1,540",
    "Crude oil prices (U.S. dollars per barrel, WEO) 3/: 2022: 96; 2023: 81; 2024: 75",
    "Petroleum Fund balance (in millions of U.S. dollars) 4/: 2022: 17,379; 2023: 17,503; 2024: 16,772; 2025: 16,130",
    "Public debt (in millions of U.S. dollars): 2022: 1,039; 2023: 955; 2024: 842; 2025: 754",
    "Population growth (annual percent change): 2022: 1.6; 2023: 1.4",
    "1/ Oil sector activities are considered non-resident activities in balance of payments statistics.",
    "2/ Includes Petroleum Fund balance and the central bank's official reserves.",
    "3/ Simple average of UK Brent, Dubai, and WTI crude oil prices based on October 2023 WEO assumptions.",
    "4/ Closing balance.",
    "[Democratic Republic of Timor-Leste and the IMF](http://www.imf.org/external/country/TLS/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://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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