In his 2019 budget speech on Friday, Francisco Lu Olo Guterres made a lengthy appeal to the government to implement “fiscal reform,” and denounced continued reliance and high withdrawals from the nation’s Petroleum Fund as a threat to the country’s future.

The withdrawal to cover the promulgated $1.48 billion 2019 State budget from the nation’s Petroleum Fund is 126.2% above the Estimated Sustainable Income (ESI).

“This means that the budget deficit is largely financed through the transfer of the Petroleum Fund, with only US $ 529 million falling within its Estimated Sustainable Income (ESI),” Guterres said.

The President warned this followed same pattern of withdrawals above the ESI in 2012, 2015, 2016 and 2017.

“We should be aware with the Government’s forecast that in 2023 the final balance of the Petroleum Fund will be approximately US $ 12 billion, and the current net worth of the oil wealth will be US $ 96 million.” 

Guterres said economic dependence on Timor-Leste’s Petroleum Fund had accentuated as domestic revenues  “remained at low levels, declining since 2016.”

“Indeed, the State Budget is now the only comprehensive public financial policy instrument available to the State annually to pursue policies and channel financial resources from oil revenues and non-oil domestic revenues,” he said.

The President also made clear that his decision to promulgate the budget was not indicative of support but made “in the present circumstances of a near-stagnant national economy, which urgently needs public funding.”

“It is up to the Government to manage these resources, in an  effective and efficient manner.

“But for the achievement of the objectives of economic growth and national development, it is indispensable that the National Parliament and the Government adopt more adequate public policies. It is also necessary to execute them more rigorously,” he said.

He implored the government to step-up economic development responsibilities, making a number of recommendations for the 2020 state budget.

This includes; “more” sustainable orientation, “greater budgetary balance,” and equitable distribution between human development versus physical development and investments.

He called for greater scrutiny of investments made using the State Budget based on criteria of high social and economic return, “with priority for human capital, education and health, productive activities and employment.”

The President also endorsed better protection Petroleum Fund assets, calling for strengthening of the criteria for eligible investment and a higher budget financing ratio based on internal tax revenues, long term fiscal sustainability and a concessional lending strategy.