At the conclusion of the mission,
"Given appropriate policies, Timor-Leste is well placed to sustainably improve living standards in line with the goals of the Strategic Development Plan (SDP). The authorities are committed to a transparent and accountable fiscal framework that has allowed oil revenues to be saved through the
"New developments suggest that Timor-Leste is entering a transition period. This comes amid a backdrop of declining oil production in the short and medium term that will impact overall GDP growth. The 2012 National Accounts data show that non-oil GDP growth has slowed markedly due to a lower but more sustainable level of government expenditure. The first-cut estimate of non-oil GDP growth in 2012 at 7.7 percent is significantly below 14.7 percent in 2011 and the average of over 12 percent during 2007 to 2011 that was driven by high rates of government spending. Our baseline projection is for non-oil GDP growth of around 5-7 percent in the medium term. Still high by international standards and in line with trends in emerging
"In the context of this transition, the key to inclusive and sustainable growth is catalyzing the private sector. This will require fostering job-rich sectors in line with Timor-Leste's fundamentals, such as agriculture, tourism, and energy. With regard to the first two sectors, Timor-Leste could market ecologically-friendly products. In the energy sector there could be startups in niche areas such as oil industry services and specialized oil-based products. The mission is encouraged by reported foreign direct investment (FDI) in areas such as cement, food processing, and tourism. With significant infrastructure improvements (Tibar Bay Port,
"As Timor-Leste builds its linkages with global trade and production networks, diversification prospects will arise. Given Timor-Leste's leadership role in the g7+ grouping, participation in the Community of Portuguese Language Countries and links with
"The mission welcomed the authorities' increased focus on fiscal sustainability and considers that a front-loading strategy in line with the SDP objectives should see expenditures stabilized at
"The financial system is slowly developing amid new challenges. The number of banks has increased with new products emerging, and the non-bank financial sector is also developing. The mission endorses the BCTL's Financial Sector Master Plan, which sets out the role of a robust and inclusive financial system, and looks forward to working with the authorities in enhancing the supervisory and regulatory frameworks and governance. It is important that the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework is developed, and also that the financial sector entities within the Special Economic Zones remain within the supervisory mandate of the BCTL. While financial markets remain underdeveloped, the current exchange rate regime that uses the US dollar remains appropriate.
"The quality of statistics continues to hamper surveillance. The mission welcomes ongoing efforts to enhance methodologies particularly relating to National Accounts, inflation and poverty data."
1 The completion of the Article IV Consultation is subject to the discussion by the IMF Executive Board.
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