## IMF Executive Board Concludes 2023 Article IV Consultation with Timor-Leste _IMF News, February 27, 2024_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2023 Article IV Consultation with Timor-Leste](https://www.imf.org/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult) ## Other formats - [Markdown version](/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult/index.md) - [Structured JSON version](/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult/index.json) - [Bundle manifest](/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult/bundle-manifest.json) ## Bibliographic details - Published: February 27, 2024 --- ### Overview - 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. ### Recent economic developments - 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. ### Outlook and risks - 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: - Near-term downside risks: an abrupt onset of a global recession and heightened commodity price volatility. - Fiscal risks: such shocks could require a fiscal response, posing obstacles to expenditure restraint and adversely affecting the balance of the Petroleum Fund. - Political and structural risks: uncertainty from public expenditure decisions; developing the Greater Sunrise oil field presents a large upside risk in the medium term. ### Executive Board assessment and recommendations - 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: - Gradual fiscal consolidation to avoid a depletion of the Petroleum Fund and secure fiscal sustainability. - Welcome prioritization of capital expenditure in the 2024 budget; further improving the quality of expenditure would support higher growth and protect the vulnerable. - Gradual revenue mobilization; welcomed authorities’ commitment to introduce a VAT, to be complemented by measures to strengthen tax administration. - 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. - Financial sector recommendations: - Directors noted systemic risks to the financial system are low; banking sector capital and liquidity levels remain sound. - Encourage promoting financial deepening and inclusion by removing structural impediments to lending and developing digital financial services. - Advance adoption of IFRS 9 and Basel III regulatory principles and address AML/CFT deficiencies. - Structural and social policy recommendations: - Structural reforms to promote private sector development, diversify the economy, and support sustainable growth. - Address bottlenecks in the agriculture and tourism sectors and foster digitalization. - Continue efforts to strengthen governance and the rule of law. - Prioritize human capital development, including improving education quality and strengthening vocational education and training to unlock the demographic dividend. - Invest in climate‑resilient infrastructure given vulnerability to climate change and natural disasters. - Engagement and capacity development: - 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. - Underscored importance of enhancing coordination across development partners. ### Key statistics and projections (selected) - 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 Table: Selected indicators (2022–2025) - 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 - Recurrent: 2022: 92.0; 2023: 67.9; 2024: 65.0; 2025: 62.6 - Net acquisition of nonfinancial assets: 2022: 12.1; 2023: 14.0; 2024: 14.1 - 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 - (In percent of Non-oil GDP): 2022: 16; 2023: -20; 2024: -41.8; 2025: -43.4 - Trade of Goods (in millions of U.S. dollars): 2022: -1,959; 2023: -1,234; 2024: -885; 2025: -939 - Exports of goods: 2022: -1,054; 2023: -346; 2024: 73; 2025: 83 - Imports of goods: 2022: 906; 2023: 887; 2024: 958; 2025: 1,022 - 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 - of which: other primary income (oil/gas) 1/: 2022: 1,106; 2023: 409; 2024: 0; 2025: 0 - 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 - (In months of imports): 2022: 196; 2023: 198; 2024: 174; 2025: 156 - 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 - (Annual percent change): 2022: 5.5; 2023: 8.1; 2024: 5.9 - 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 - (Public debt in percent of Non-oil GDP): 2022: 15.1; 2023: 15.0; 2024: 14.2; 2025: 14.5 - Population growth (annual percent change): 2022: 1.6; 2023: 1.4 Notes: - 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. *International Monetary Fund. Executive Board conclusion: Article IV consultation with Timor-Leste (Press Release No. 24/59), February 27, 2024.* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2024/02/27/pr2459-timor-leste-imf-exec-board-concludes-2023-art-iv-consult_