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Timor-Leste facing problems with spending

28 February 2013

Timor-Leste (East Timor) was once seen as the poster child for developing nations. It had natural resources, a comprehensive legal framework covering their extraction and an oil fund. Now, almost 11 years after attaining independence, the country better resembles a problem child

Unlike other developing countries, Timor-Leste’s challenge is not earning revenue, but understanding how to spend it. Despite having more than $12 billion stashed away in a petroleum fund, as well as annual oil income which peaked in 2012 at $3.6bn, the tiny southeast Asian nation could be bankrupt by 2022. In 2005, its leaders were hailed by the international community when, in a bid to stave off the resource curse, they established an offshore sovereign wealth fund. But symptoms of the curse have started to show. State spending has surged, and based on present rates of increase – the actual budget for 2012 was 28% higher than 2011 – is unsustainable. Without adjusting for inflation, spending has jumped 587% since 2007 – when the oil money really started to flow – to $1.8bn in 2012. If this trend continues, the petroleum fund could be empty by 2020, warns Dili-based policy...



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