Timor-Leste’s finance minister on Thursday called for technical support from the International Monetary Fund (IMF) to implement a project for a free trade zone and an industrial park on the border between Timor-Leste and Indonesia
Speaking at the World Bank’s spring meetings in Washington, Rui Gomes argued that the IMF should have a more effective presence on the ground to support the Timor-Leste government, including in the development of a fiscal responsibility law that “can help improve fiscal discipline”.
“The pressing situation today can create opportunities to develop new products,” said Rui Gomes, referring to initiatives for the border area, discussed by the heads of state of Timor-Leste and Indonesia during José Ramos-Horta’s state visit to that country.
“What we are looking for in our partnership with the IMF are two main things: technical assistance from the IMF to help us develop a well-adapted Fiscal Responsibility Law (FRL) that can help improve fiscal discipline, and technical assistance and support for the completion of the free trade zone and the industrial park on the border between Timor-Leste and Indonesia”, he underlined.
Rui Gomes was speaking at the governors meeting of the Brazilian Electoral Circle at the IMF, of which Timor-Leste is part, where he highlighted the government’s efforts to respond to the economic situation caused by the government’s impasse and the Covid-19 pandemic.
During the meeting – with the participation of Afonso Bevilaqua, Brazilian responsible at the IMF, and Paulo Guedes, Brazilian Minister of Economy, among others – Rui Gomes defended the importance of multilateralism and the reinforcement of South-South partnerships.
“At a time when we need more cooperation between countries and more multilateralism, we see instead countries turning inwards and left alone to work out their own survival strategies. I think we need more and better multilateral, multi-sectoral and cross-sectoral solutions to inspire greater confidence in multilateralism,” the Timorese minister argued.
“The World Bank and the International Monetary Fund need to strengthen their teams on the ground to provide better quality support to governments and to rescue the spirit of multilateralism. The current business models used by the Bank and the IMF will not be enough”, he stressed.
In parallel, he said, Timor-Leste wants to advance with “regional and sub-regional approaches, including South-South and triangular cooperation”, particularly interested in “collaborating on opportunities for sustainable growth”.
Regarding the situation in Timor-Leste, Rui Gomes referred to efforts for economic development and institutional strengthening, in addition to measures taken to deal with the effects of the Covid-19 pandemic.
Despite some recovery this year and next, Rui Gomes said growth is insufficient to meet the challenges.
“The non-oil economy grew by 2.9% in 2021, with this year’s non-oil economy estimated to grow by 3.3%, due to public expenditure and the recovery of private consumption. This level of growth is clearly insufficient to bring about significant changes in terms of poverty reduction and improved living standards,” he said.
“The private sector is largely underdeveloped, with casual employment and low productivity. Social and economic development is almost entirely dependent on state activity, whose source of funding is the Petroleum Fund. Oil revenues from active oil fields are expected to cease early next year,” he recalled.
The country, he said, faces the risk that “structural issues of poverty and unemployment” could lead to “an increase in social tensions and conflicts”, hampering the government’s efforts on issues such as combating climate change, fiscal sustainability and supporting “a transition to a private sector-led economy”.
“The economy needs to diversify and move away from oil revenues, so reforms are needed for a diversified and resilient economy. We are now working with our neighbour Indonesia to develop a free trade zone and industrial park on the border, which can potentially bring benefits and create value for both countries,” he recalled.
Gomes also referred to a number of reforms to mobilise domestic revenues, alluding to increases in some selective taxes on consumption in the draft state budget for 2023, currently being dealt with in parliament.
Also planned for next year is the issue of the first treasury bonds, oriented initially to local institutions and funds, allowing the government to generate new revenues.
“We know that these measures are still not sufficient in view of the increased level of public spending and the pressing issues facing the country,” he noted.
It is worth recalling that since 2012, in what the Government said was an effort to improve its visibility in the IMF, Timor-Leste has been participating in Brazil’s constituency in the Executive Council of the international institution, which also includes, among other countries, Cabo Verde.
