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International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation highlights that Timor-Leste remains a fragile post-conflict nation with weak human and institutional capacity and large infrastructure gaps. The main challenge facing Timor-Leste is to effectively manage its petroleum wealth to reduce public-sector dependence, diversify the non-oil economy, generate jobs for a young and rapidly-growing population, and raise living standards. Political uncertainty constrained public spending in 2017–18, resulting in a sharp contraction of non-oil GDP in 2017 and flat growth in 2018. The report discusses that risks to the outlook are closely tied to the success of fiscal and structural reforms to maintain macroeconomic stability, ensure long-run fiscal sustainability, and facilitate economic diversification. The consultation recommends that a fiscal strategy should be pursued to improve expenditure control and efficiency, mobilize domestic revenue, and commit to protecting the wealth of the Petroleum Fund. Ongoing efforts to strengthen public financial management and promote good governance are crucial to ensure public investment efficiency and enhance the quality of public services.
International Monetary Fund. Asia and Pacific Dept
This 2017 Article IV Consultation highlights that Timor-Leste’s non-oil real GDP growth in 2016 is estimated at 5.5 percent, supported by a near doubling of government capital spending, albeit with large import leakages. Real total GDP declined by 7.9 percent in 2016, owing to a sharp fall in oil production. The overall fiscal deficit widened to 30.8 percent of GDP in 2016. Non-oil real GDP growth is projected to moderate to 3 percent in 2017, owing to lower government expenditure and the slowdown of activity owing to the delayed formation of the new government after the parliamentary elections in July. Inflationary pressures remain low, albeit with a return to positive territory with rising global food and fuel prices.
Mr. Christian Mumssen, Yasemin Bal Gunduz, Mr. Christian H Ebeke, and Ms. Linda Kaltani
This paper studies the short and longer-term impact of IMF engagement in Low-Income Countries (LICs) over nearly three decades. In contrast to earlier studies, we focus on a sample composed exclusively of LICs and disentangle the different effects of IMF longer-term engagement and short-term financing using a propensity score matching approach to control for selection bias. Our results indicate that longer-term IMF support (at least five years of program engagement per decade) helped LICs sustain economic growth and boost resilience by building fiscal buffers. Interestingly, the size of IMF financing has no significant impact on economic growth, possibly pointing to the prominent role of IMF policy advice and institutional capacity building in the context of longer-term engagement. We also present evidence that the short-term IMF engagement through augmentations of existing programs or short-term and emergency facilities is positively associated with a wide range of macroeconomic outcomes. Notably, the IMF financial support has the greatest impact on short-term growth when LICs are faced with substantial macroeconomic imbalances or exogenous shocks.
International Monetary Fund. Asia and Pacific Dept
This 2013 Article IV Consultation highlights that the non-oil economy of the Democratic Republic of Timor-Leste has grown rapidly in recent years with growth averaging close to 12 percent from 2008 to 2011, allowing the average per capita income to steadily increase. The growth was driven by a rapid increase in government spending, which boosted the public administration and construction sectors. So far, the contributions from agriculture and manufacturing have been modest. Despite falling from the peak of more than 15 percent in 2011, the inflation rate is still in double digits. Executive Directors have welcomed the revised budgetary framework that anticipates a stabilization of government expenditures and revenue diversification.
International Monetary Fund
Timor-Leste has made substantial progress toward restoring stability and rebuilding the country after emerging from a long struggle for independence and internal conflicts between 1999 and 2006. The government has launched its Strategic Development Plan to step up development. A well-managed Petroleum Fund is in place, and new institutions have been established to manage large public investment programs. The authorities need to further strengthen institutional capacities and develop human resources. Developing the financial sector and strengthening the credit culture are crucial for sustained growth in the private sector.
International Monetary Fund
The Timorese economy has improved owing to high oil-financed public spending and a rebound in agriculture, non-oil growth. Despite high bank deposit growth, private sector credit has remained stagnant. The medium-term outlook for growth is positive. Timor-Leste’s key challenge remains to use its petroleum wealth wisely to build a strong non-oil economy and raise living standards. Improvements in financial management and budget execution will be important. Productivity-enhancing structural reforms and efforts to build labor skills would improve competitiveness in non-oil industries and services.
International Monetary Fund. External Relations Dept.
On July 17, IMF First Deputy Managing Director Anne Krueger addressed a National Bureau for Economic Research (NBER) conference on the lessons to be learned from the Argentina crisis and how these can be used to raise the effectiveness of IMF efforts to prevent and resolve financial crises. Following are edited excerpts from her remarks; the full text is available on the IMF’s website (