East Timor | Non-oil economy expected to grow by 5 percent

The growth rate of East Timor’s non-oil economy is expected to be around 5.0 percent by 2019, after two years of political uncertainties that have negatively affected economic activity, according to a forecast from a mission of the International Monetary Fund (IMF) that visited the country from January 14 to 25.

The mission’s recently released document notes that public spending will continue to depend on the withdrawal of funds from the Oil Fund, since state revenue sources remain small. The members of the mission, led by Niklas Westelius, argue for the need to develop a fiscal strategy to ensure long-term fiscal sustainability while also protecting assets currently held by the Oil Fund.

“Continued investment in infrastructure, education and health care should be given priority, and policy actors should accelerate the introduction of structural reforms so that economic diversification and job creation can be fostered,” the statement said.

The document released in Washington once again mentions the political uncertainties that could undermine short-term forecasts, and that in the medium term insufficient progress to diversify the economy and create jobs in the private sector could have a negative impact on the labor market.

“In addition, with revenues from active oil fields due to end in 2022, continued withdrawals from the Oil Fund could jeopardize long-term fiscal sustainability,” with the IMF team emphasizing the need to ensure long-term fiscal sustainability and to safeguard the assets of the Fund.

The statement said that this fiscal strategy should focus on strengthening control and efficiency of expenditure, mobilizing domestic tax revenue through the introduction of Value Added Tax and the effective use of financing on preferential terms.  MDT/Macauhub