## IMF Staff Complete 2025 Article IV Mission to Timor-Leste

_IMF News, July 2, 2025_

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**Canonical URL:** [IMF Staff Complete 2025 Article IV Mission to Timor-Leste](https://www.imf.org/en/news/articles/2025/07/02/pr25232-imf-staff-complete-2025-article-iv-mission-to-timor-leste)

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## Bibliographic details
- Published: July 2, 2025

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### Mission summary and context
- 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.

### Macroeconomic outlook and key projections
- 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.

### Fiscal positions and medium-term concerns
- 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.

### Fiscal policy guidance and 2026 fiscal parameters
- 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.

### Financial sector and structural reform recommendations
- 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.

### Engagement and capacity development
- 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.*

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_Source: https://www.imf.org/en/news/articles/2025/07/02/pr25232-imf-staff-complete-2025-article-iv-mission-to-timor-leste_