Timor-Leste government blocks IMF Report
23 December 2014
Timor-Leste’s Government has prevented the International Monetary Fund (IMF) from publishing its 2014 “Article IV Consultation” report on Timor-Leste. Because of irresolvable disagreement with the report’s content, the Government decided not to allow the release of the report this year. La’o Hamutuk is saddened by this decision, as we believe that information from a variety of viewpoints is essential to developing sustainable, equitable economic and fiscal policies.
These reports, around 55-70 pages, usually contain a Staff Report, an Informational Annex and a Debt Sustainability Analysis. They also include statistics about the country’s economy, as well as forecasts for the next two years. Many governments request changes to draft reports, and the IMF often incorporates them. The reports usually include “Authorities’ views” where the government’s differences with the IMF are set out. However, the IMF will not publish a report or press release about an Article IV Consultation without the Government’s tacit or active consent. In 2013, 99% of countries agreed to publish the press release, and around 90%, including Timor-Leste, agreed to publish the detailed report.
Although La’o Hamutuk does not always agree with the IMF, particularly regarding economic justice, borrowing and the role of the private sector, we see these reports as an important contribution toward understanding Timor-Leste’s economy, and are disappointed that the public, including ourselves, have not been able to read the latest one.
Since 2003, the IMF has prepared ten such reports for Timor-Leste, and until this year the Timor-Leste Government has always agreed to their publication.
Research for Timor-Leste’s 2014 Article IV report began with a mission from Washington to Dili during the first half of June 2014. As described in their 19 June press release: “The mission met with the Minister of Finance, the Governor of the Banco Central de Timor-Leste, senior officials, development partners, and representatives from the private sector and civil society to discuss recent economic developments and the medium-term outlook.” At its conclusion, mission head Neil Saker wrote that “Timor-Leste is entering a transition period … declining oil production in the short and medium term will impact overall GDP growth,” summarized some specific aspects and offered suggestions for economic diversification and enhancement of the "business cases" for the Tasi Mane project and Special Economic Zones.
The team returned to Washington and prepared its report, which was discussed between the Timor-Leste government and the IMF Executive Board, which approved it on 15 September. In a press release dated 22 October, to which the Government consented, the Executive Board praised the Petroleum Fund and political stability, but suggested better long-term planning. They wrote: “Timor-Leste remains one of the most oil dependent countries and declining oil production has focused attention on ensuring medium-term sustainability and inclusive growth that tackles poverty in a still fragile environment. This implies the need to smooth fiscal spending over the long term to avoid a fiscal cliff. … The key to inclusive and sustainable growth is fostering potentially job-rich sectors in line with Timor-Leste’s fundamentals, such as agriculture, tourism and energy niches. … Risks include: (i) excessive spending depletes the Petroleum Fund (PF) in the absence of new revenue sources; (ii) the private sector fails to develop momentum leading to lower non-oil growth as public spending stabilizes; (iii) insufficient regulation of activities in the newly established Special Economic Zones (SEZs); and (iv) increased gas production elsewhere in the region limits investment in new fields. Poor data limit the analysis of macroeconomic and poverty developments due to methodological issues and capacity constraints that are being slowly tackled.”
The press release includes a statistical table, showing that total GDP dropped more than 30% from 2011 to 2014, and projecting non-oil GDP to grow 5% to 7% per year during 2013-2015. Because the report was drafted in mid-year, it does not consider the sharp decline in oil prices (right) or that the 2015 State Budget ended up 21% larger than the proposed fiscal envelope. Nevertheless, its statistics are an important contribution to policy-making.
The complete report is usually made public one or two months after the Executive Board approves it, following further dialogue with the Government. However, the revisions accepted by the IMF were apparently insufficient this year, or the Government was uncomfortable with elements of the IMF’s analysis, and Dili decided to block its publication.
On 18 December, Timor-Leste's Government issued a press release celebrating “Twelve good news stories for Timor-Leste.” On 29 October, a Government statement lauded Timor-Leste’s improvement in one aspect in the World Bank’s 2015 Doing Business report, while downplaying or misrepresenting stagnation or decline in nearly every other score (left), which resulted in a rank of 172 out of 189 countries (left). A few weeks ago, Transparency International ranked Timor-Leste 133 out of 175 countries in perceptions of corruption, worse than recent years (right). Other reports show that, despite some improvement, Timor-Leste is still far from acceptable levels of child nutrition, quality of education and public health. Widespread poverty is obvious to anyone who travels around the districts. Unfortunately, our natural resource wealth is being rapidly depleted, and petroleum revenues during the first ten months of 2014 were 36% lower than during the first ten months of 2013.
La’o Hamutuk applauds the gains which have been achieved, but we urge policy-makers to consider disquieting information as well as successes, in order to make decisions which will benefit Timor-Leste’s people over the longer term. The enactment of a 2015 State Budget with reduced investment in human resources – health and education – while continuing to spend at unsustainable levels, shows that deeper economic understanding is needed. Sadly, suppression of the IMF report makes it even harder.
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)