## Democratic Republic of Timor-Leste: Selected Issues

_IMF Staff Country Reports, December 17, 2024_

## Source details

**Canonical URL:** [Democratic Republic of Timor-Leste: Selected Issues](https://www.imf.org/en/publications/cr/issues/2024/12/17/democratic-republic-of-timor-leste-selected-issues-559646)

## Other formats

- [Markdown version](/en/publications/cr/issues/2024/12/17/democratic-republic-of-timor-leste-selected-issues-559646/index.md)
- [Structured JSON version](/en/publications/cr/issues/2024/12/17/democratic-republic-of-timor-leste-selected-issues-559646/index.json)
- [Bundle manifest](/en/publications/cr/issues/2024/12/17/democratic-republic-of-timor-leste-selected-issues-559646/bundle-manifest.json)

## Bibliographic details
- Published: December 17, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400294938.002

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### Overview
- This Selected Issues paper analyzes Timor-Leste’s historical economic performance and structure under dollarization.
- It examines several dimensions that determine the benefits and costs of the regime, and assesses implications for competitiveness and macroeconomic stability.

### Key analytical dimensions considered
- (1) growth and inflation performance
- (2) business and financial cycle synchronization
- (3) adjustment to external shocks
- (4) competitiveness

### Main findings
- Dollarization has helped Timor-Leste achieve relatively low and stable inflation in the context of post conflict fragility.
- Dollarization may be contributing to weakening competitiveness.
- There is a severe overvaluation of the real effective exchange rate following a series of external shocks in the past 10 years; this overvaluation may be a contributing factor to weakened competitiveness.
- Structural bottlenecks that constrain the development of the private sector are additional contributing factors to weakened competitiveness.

### Policy recommendations and reform priorities
- Progress at addressing the identified competitiveness and structural challenges is important to strengthen the economy’s performance under dollarization.
- Build technical capacity at the central bank.
- Improve the regulatory and legal framework for the financial system.
- Treat the above reforms as pre-requisites before consideration is given to the introduction of a national currency.
- Note: The choice of currency regime lies with the authorities.

*Democratic Republic of Timor-Leste: Selected Issues — IMF Staff Country Reports, December 17, 2024.*

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## Content in this bundle

- **How Has Dollarization Served Timor-Leste So Far?**
  - [How Has Dollarization Served Timor-Leste So Far? (Markdown version)](/-/media/files/publications/cr/2024/english/1tlsea2024003-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [How Has Dollarization Served Timor-Leste So Far? (PDF)](/-/media/files/publications/cr/2024/english/1tlsea2024003-print-pdf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2024/12/17/democratic-republic-of-timor-leste-selected-issues-559646_