Policy challenge—spreading the benefits of
energy exports ---------------
Balancing the policy objectives of achieving high economic growth and
controlling inflation is an important policy challenge facing Timor-
Leste’s leaders. Although 2012 saw progress in bringing down inflation,
and persistent supply constraints mean inflation remains a
concern. Inflation will likely decline in 2013 as some events that drove it in
2012 are unlikely to reoccur. If the US dollar continues to strengthen, that
would lead to lower import prices and reduce inflation as well. However,
planned increases in government expenditure in 2014 and beyond are
likely to renew price pressure. Measures to address supply constraints,
such as developing public infrastructure to address bottlenecks in supply
chains and encouraging new businesses to operate in Timor-Leste, offer
the most promising avenues for stemming inflation in the long run.
Disagreement between the government and oil companies over tax
payments raises concern about the prospects for developing the Greater
Sunrise field. How this disagreement is resolved could have important
implications for the country’s long-term fiscal position. Projected
balances in the Petroleum Fund—and the amounts that can be taken
out of it to finance development without sacrificing the fund’s long-term
sustainability—take into account projected petroleum revenues only from
areas currently being exploited (Figure 3.35.5). However, the finite nature
of the country’s petroleum reserves, the sensitivity of revenues to global
price fluctuations, and events like the tax payment dispute highlight the
need for the government to ensure that fiscal balances are kept in check
and that scarce government resources are used efficiently.
----------- Source: Timor-Leste 2013 State Budget ( http://timor-leste.gov.tl/?cat=28&lang=en ) Note:
Sustainable withdrawals are defined as the
maximum amount that can be appropriated from the Petroleum Fund in a fiscal year and leave sufficient resources in the Petroleum Fund for an amount of the equal real value to be appropriated in all later years. It is
set to be 3.0% of the Petroleum Wealth. The Government can withdraw an amount from the Petroleum Fund in excess of this amount if a justification based on in the long-term interest of Timor-Leste is provided to and approved by the National Parliament.
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