Fretilin, the lead vote winner from 22 July parliamentary election, had suggested it would form a coalition with the People‘s Liberation Party (PLP) and new youth party KHUNTO, in order to gain majority power.

The announcement followed a meeting between Fretilin’s leader Mari Alkatiri and Xanana Gusmao, the Secretary General of National Congress for Timorese Reconstruction (CNRT), Timor-Leste’s second most powerful political force. Alkatiri said his party would not announce the new government as planned, but continue negotiation talks.

“We will present the formation government to the President of the Republic next week,’’ Alkatiri said on Sunday.

 The meeting marks a stark contrast from the stance CNRT made on August 4 when it said it would not form a coalition government. At the time Gusmao said he would also resign as head of the party.

"This is the right moment for Fretilin, as the winning party of the 2017 elections, to assume, and with full legitimacy, the reins of government," Gusmao said at the time.

The two parties had jointly ruled through a parliamentary majority alliance that Gusmao set-up in 2015.

CNRT lost eight seats in parliament, with Fretilin taking a majority 29.7 per cent of vote compared to 29.5 per cent, giving Fretilin’s leader Mari Alkatiri a narrow victory.

Fretilin fell short of winning the 33 seats needed in the 65-seat parliament for one party to rule alone.