Asia and Pacific > Timor-Leste, Democratic Republic of

You are looking at 1 - 10 of 76 items for

  • Type: Journal Issue x
Clear All Modify Search
Raju Huidrom
and
Danila Smirnov
This paper analyzes Timor-Leste’s historical economic performance and structure under dollarization. It considers several dimensions that determine the benefits and costs of the regime: (i) growth and inflation performance; (ii) business and financial cycle synchronization; (iii) adjustment to external shocks; and (iv) competitiveness. Dollarization has helped Timor-Leste achieve relatively low and stable inflation in the context of post conflict fragility, but may be contributing to weakening competitiveness. Improved performance under dollarization requires reduced fiscal imbalances and advancement of reforms that address structural bottlenecks that also undermine competitiveness.
International Monetary Fund. Asia and Pacific Dept
The 2023 Article IV Consultation discusses that Timor-Leste has made impressive progress since independence in 2002 but remains a fragile post-conflict nation with pressing development needs. With oil and gas production having recently come to a halt, progress on diversifying the economy and developing the private sector is urgently needed. The discussions focused on ensuring that Timor-Leste’s substantial savings are best utilized to support development objectives while achieving fiscal sustainability. In order to develop a vibrant private sector, Timor-Leste should undertake an ambitious agenda of reforms. Public expenditure should be reduced to align it with the economy’s absorptive capacity, and its quality improved including by further prioritizing spending on human and physical capital. Domestic revenue should be gradually mobilized. A medium-term fiscal framework should underpin these efforts by setting a clear roadmap to fiscal sustainability. To boost growth and diversify the economy, structural reforms should remove bottlenecks in the agriculture and tourism sectors and foster digitalization to boost productivity, while addressing legal constraints that hinder business operations and financial development.