East Timor: How a debt-free nation succumbs to debt

La’o Hamutuk notes that the increase in East Timor’s budget is one of the highest in the world:

In nominal terms, the 2012 budget is 35% larger than 2011, more than five times the original 2008 budget. According to the IMF World Economic Outlook, Zimbabwe is the only country in the world whose state budget grew faster during the last four years. Congo (DRC) places third with an increase of 267%. Even after adjusting for inflation, Timor-Leste's 2012 budget is 25% larger than last year's and has grown 273% since 2006.

Summary of budget proposal

East Timor’s economy is heavily dependent on oil revenues but economists have been urging the government to diversify the country’s economic activities. La’o Hamutuk is concerned that the budget doesn’t reflect the need to develop non-oil industries:

If you remove state expenditures, Timor-Leste's non-oil economy is stagnant and probably shrinking. With about 95% of state revenues coming from oil and gas, what economy will we have after the oil and gas is used up?
In the medium term, our oil wealth can't even pay for provide half the level of services the Government will provide next year. That's why we need to develop our non-oil economy.

East Timor doesn’t have a foreign debt but it will become a debtor next year:

The proposed budget includes $33 million in loans for Dili sanitation and national roads during 2012, with more in future years. This is the first time the Government has asked Parliament to approve actual borrowing, now that the Deputados have approved all the required legislation over the last few months.

The government has created a Budget Transparency Portal which allows the public to access budget documents. The government also uploaded the proposed 2012 budget on its website. There’s also a summary of budget deliberations in the Parliament:

Some parliamentarians criticized that the budget allocation for the three key priority sectors (education, health, agriculture) has gradually decreased over the past years which they clam will demonstrate the lack of attention given by the government to them and contradicts with this Government’s initial commitment. Further, some also alleged that the Government prefers investing in mega projects which are beyond their capacity to execute and will end up in misuse of lots money. Other argued that the Government neglected the most fundamental sectors that are the pillars of development of any government across the world.

A ‘Budget Made Simple’ document was also released which gives an overview of the budget:

Timor-Leste now has one of the most transparent budget processes in the world with the budget debates broadcast live on television and radio, the budget documentation available to the public and comprehensive real-time budget expenditure data available online through the Timor-Leste Transparency Portal
…the Government presents the “Budget Made Simple”, an information campaign to present budget information in a clear and practical manner.

La’o Hamutuk thinks the budget websites need improvement:

We appreciate the efficient coordination between the Parliament and the Ministry to publish the documents online quickly, improving transparency to make them more accessible than in recent years. Unfortunately, the Ministry website is cumbersome to access and some of the budget files are unnecessarily large.

Written by Mong Palatino