“MAIN FINDINGS OF IMF REPORT DAMN TIMOR-LESTE GOVERNMENT’S PUBLIC FINANCE MANAGEMENT RECORD.”

FRETILIN.Media FLASH:  20.01.2011

SOURCE: DEMOCRATIC REPUBLIC OF TIMOR-LESTE: INTERNATIONAL MONETARY FUND PUBLIC FINANCE MANAGEMENT – PERFORMANCE REPORT, AUGUST 2010.

FRETILIN opinion: The finding below by the IMF highlights the weakness of budget planning by this government which makes us all concerned with the very large budget submission for capital investment proposed in the infrastructure fund.  Lack of planning and adequate forecasts for the increasing annual national budgets has been a major failure during this de facto government. 

This brings into question the credibility of other forecasting made by the de facto government’s macro economic unit that claims high growth and low inflation in the face of economic reality in Timor-Leste’s petro dollar driven bubble economy that will one day burst with dangerous consequences.

The almost total absence of results in terms of infrastructure development and basic public services despite huge public investment is symptomatic of the “petroleum curse” that has befallen on Timor-Leste.

With all these weaknesses, including poor budget execution, the national parliament is being asked to approve a budget of over US$1.2 billion when donor assistance is taken into account.

IMF REPORT STATES AT PAGE 10:

“Fiscal and budgetary policies lack a solid medium-term perspective.  Macroeconomic projections are not extended to the medium term and there is no medium-term fiscal framework that could act as frame for medium-term expenditure plans.  There are incremental estimates of recurrent budget, but these do not mean much if they are not aligned with growth and inflation estimates and cost drivers of government policies.  As a starting point for including multiyear perspectives it would make sense for the macro unit in the MOF to start providing medium-term macrofiscal projections.”

AT PAGES 9-10:

“The MOF lacks the time and capacity for adequate review of rationale, costing, and impact of public investment.  The MOF, perhaps together with the new planning agency under the prime minister’s office, should be allotted more time to review investment proposals on alignment with government priorities, appropriate costing and, for larger investments use of cost-benefit analysis (possibly on an outsourced basis) should be used to analyze expected societal benefits.  The quality of public investment will to a large extent determine ambitions for development of the non-oil economy will be realized.”

END