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RDTL General State Budget for 2011

17 October 2010.  Updated 17 September 2011.

Liga ba pajina ida ne'e iha lingua Tetum.

Link to La'o Hamutuk's submission to Parliamentary Committee C (also Tetum) and follow-up letter.

Link to index pages on original 2010 state budget and 2010 mid-year budget adjustment.

Link to page on proposed budget for 2012.

Contents of this page


For 2010, Timor-Leste operated under two state budgets. In July, the $660 million allocated for expenditures at the end of 2009 was increased by 27%, to $838 million, in the July mid-year rectification, which also increased the amount to be withdrawn from the Petroleum Fund during 2010 to $811 million, $309 million more than the Estimated Sustainable Income for the year. [Click here for notes on the graphic at right.]

The Government also had significant problems carrying out its programs. As described in the Budget Execution Report for the first half of 2010, the Government had spent only 30% of the original budget allocation during six months. In order to execute the entire rectified budget by the end of 2010, the Government will have to spend money three times faster that has been.  In other words, after spending $1.1 million/day from January to June, spending from July to December will have to average $3.5 million/day to execute the budget. (For reference, spending during 2009 averaged $1.66 million/day, including the ineffective Pakote Referendum.)

La'o Hamutuk believes that saving the people's money is better than wasting it, and we do not encourage rapid spending without planning or results. However, the results this year are not encouraging. Notwithstanding the Prime Minister showing people in every subdistrict that physical infrastructure will be the main component of the National Strategic Development Plan, the Ministry of Infrastructure only executed 9% of its $137 million Capital and Development Budget in the first half of the year. If one leaves out the $50 million allocated to the problematic new heavy oil project, less than 2.5% of the $87 million allocated for all other infrastructure capital projects (water, roads, flood control, communication, bridges, etc.) was spent.

Last year, Timor-Leste enacted a Budget and Financial Management Law (also Port.), which includes a calendar for enacting the budget which requires the Government to submit the budget to Parliament by 15 October. In late September, Parliament accepted the Prime Minister's request to delay this by a month (law in Portuguese), reducing the time for discussion of the 2011 budget.

The Ministry of Finance originally hoped for total state expenditures of $714.7 million during 2011. (Table 2.7 in the draft Strategic Development Plan projects $838.2 million.)  However, the requests from each ministry added up to about $1,500 million, which was negotiated downward to $985 million.

The Government changed the underlying assumptions for Estimating the Sustainable Income, using less prudent assumptions to increase the ESI by $232 million, to $734 million, and anticipates $110 million  in non-oil revenues. During 2009 and 2010, the Government transferred more than the ESI out of the Petroleum Fund into their operating account. The proposed 2011 budget stays within the enlarged ESI by filling the deficit with $141 million from  past withdrawals from the Petroleum Fund.

Click here for latest oil prices.

Nevertheless, the Government proposed revisions to the Petroleum Fund Law  to increase the allowed investments in the stock market and other non-bond instruments, loosen the spending limitations and other changes. A draft revision (also Portuguese) was circulated on 23 October; La'o Hamutuk made a submission.

Government's Budget proposal

On 11 November, the Council of Ministers approved the General State Budget for 2011, totaling $985 million, with expenditures as follows:

  • $116 million for wages and salaries
  • $270 million for goods and services
  • $164 million in transfers
  • $28 million for minor capital
  • $406 million for capital and development, of which $317 million is for a new "Infrastructure Fund."

Revenues include

  • $734 million transferred from the Petroleum Fund
  • $110 million in expected non-petroleum receipts
  • $141 million from the Consolidated Fund (unspent transfers from the Petroleum Fund during 2010).

The Ministry of Finance declined to make the budget documents available, but La'o Hamutuk obtained copies from members of Parliament and has scanned, translated and posted key documents here as downloadable PDFs.

Skip down for final budget documents.

Click here for the entire Budget Book 1 (1.5 MB) in English, including the law and its annexes. You can also download individual parts of Book 1 as follows: 

We did not scan Books 2 (annual action plans), 3 (districts), 4 (department-level expenditures), or 5 (development partners support), although some of these were later web-published by the Ministry of Finance. However, we have done the following

Parliamentary Committees

On 26 November, La'o Hamutuk was invited by Committee D (Agriculture, Forests, Natural Resources and Environment) of the National Parliament to share perspectives about the budget. After the hearing, we prepared a submission for the Committee (also Tetum).

On 14 December, La'o Hamutuk wrote a letter to the IMF to provide new information for their recent “Report on Observance of Standards and Codes (ROSC)—Fiscal Transparency Module” and “Public Financial Management—Performance Report” on Timor-Leste. The IMF responded in January: "Thank you very much for your in-depth review... We very much appreciate La'o Hamutuk's constructive input and dialogue on public financial management issues. With your government's permission, we hope to continue that dialogue in coming years."  The IMF's annual report on Timor-Leste's economy was eventually released in March 2011, too late to inform the budget discussions.

On 15 December La'o Hamutuk testified to Committee C (Economy and Finances) of the Parliament, presenting a more detailed submission (also Tetum) than we had provided earlier, discussing the following:

  • Spending at this level is unwise and unsustainable.

  • The budget makes imprudent assumptions about oil prices.

  • The proposed revision of the Petroleum Fund Law threatens fiscal sustainability.

  • The Infrastructure Fund undercuts Parliamentary authority.

  • The national electric project is much more expensive than it appears.

  • The “Tasi Mane” project is a troublesome foot in the door.

  • The PETRONATIL National Oil Company is dangerous and problematic.

  • The Institute for Petroleum and Geology should be a normal Government department.

  • The Infrastructure Fund undercuts Parliamentary authority.

  • The Human Capital Development Fund prioritizes the state over our citizens.

  • Parliament and the public must have access to full information.

  • Key state institutions must continue to grow.

Our submission recommended

  1. Keep spending within sustainable levels, based on prudent projections of oil prices. Proposed massive budget increases for 2011 and 2012 should be curtailed, and future withdrawals from the Petroleum Fund should not exceed the Estimated Sustainable Income.

  2. Emphasize that expenditures are connected with revenues, and that the current surge in petroleum-related income is only temporary. Insist that the Government provide expenditure projections after 2010 based on actual plans, rather than econometric models.

  3. Consider the budgetary implications of the pending revision of the Petroleum Fund Law, and use more accurate and realistic data than the Government provides when considering both the Budget and the Petroleum Fund Law revision.

  4. Refuse to establish the Infrastructure Fund until complete and detailed annual cost, employment and schedule information is provided for each project, and until Parliament has approved the National Strategic Development Plan, with necessary oversight processes, organs and laws. Do not surrender Parliamentary authority to oversee one-third of the budget. [The day after La'o Hamutuk testified to Committee C, the Ministry provided a little of this information.]

  5. Do not approve more money for the Heavy Oil project and national electric grid until the Government has provided accurate, comprehensive information about the project’s many problems, and until adequate consideration has been given to renewable sources of energy for Timor-Leste’s people.

  6. Insist on accurate and detailed cost information and revenue and employment projections for the full project cycle of the Tasi Mane projects, so that Parliament can decide if they are a reasonable investment of state resources.

  7. Evaluate whether spending large amounts of public money to prepare for a possible LNG plant is worthwhile, since the company with decision-making power refuses to consider that option.

  8. Prioritize development of a strong non-oil economy, primarily based on agriculture, to replace transient oil revenues and industry.

  9. Reject funding for the national oil company until it has been established by Parliamentary law with adequate safeguards, accountability and transparency, and for the Institute of Petroleum Geology except within the structure of SERN.

  10. Insist that the budget give priority to education of Timor-Leste citizens in Timor-Leste, rather than sending a few public servants for expensive schooling overseas.

  11. Make budgetary decisions based on facts, rather than on political propaganda, and encourage the Government to provide accurate information about our economy rather than campaign promises.

  12. Insist on unrestricted access by Parliament to the FreeBalance financial information system.

  13. Allow hiring of additional personnel for key sectors like health, education and agriculture, and to manage and maintain new infrastructure, rather than expanding armed forces only.

The President of Committee C asked La'o Hamutuk to provide additional information on a few topics, and on 3 January we sent him a letter (also Tetum) discussing the following:

  • The budget for the electric grid will not meet contractual obligations.

  • Some state organs pay more to advisors than to their own personnel.

  • Overspending last year’s ESI is not transferable to 2011.

  • The Government’s interpretation of the Budget and Financial Management Law for Special Funds undermines Parliament’s Constitutional authority.

  • The Infrastructure Fund is a dangerous precedent and premature expenditure.

Plenary discussion and approval

Discussion of the budget began in the Parliamentary plenary on 12 January with a presentation by the Prime Minister (also Tetum and Portuguese), followed by the report from Committee C (also Portuguese original), which recommended many fundamental alterations. During three days of debate, FRETILIN and other parties presented their views.

Late on the afternoon for Friday 14 January, Parliament approved the budget in generality by a vote of 43 in favor, 21 against (FRETILIN), and 1 abstention (Manuel Tilman, KOTA). The Government issued a press release celebrating the "positive and constructive debate."

At mid-day on 28 January, Parliament gave final approval to the budget by a 42-21-1 vote. During ten days of debate, they increased the budget by $321 million, including $282 million more for the heavy oil power plants. Other additions included $14 million for veterans, $2 million for political parties, and $1 million for the PNTL Vulnerable Persons Unit.

Parliament increased the transfer from the Petroleum Fund during 2011 to $1.055 billion, $321 million more than the Estimated Sustainable Income. There was confusion as to whether this is legal, since the Government had not provided the explanation required by Article 9 of the Petroleum Fund Law, and the issue may end up in court. The Budget returned to Committee C for final edit, and it was ratified by Parliament on 1 February and sent to President Jose Ramos-Horta for promulgation.

The Government issued a press release (also Port.) to celebrate the budget's passage by Parliament.

The President and the Appeals Court

On 4 February, La'o Hamutuk wrote to President Jose Ramos-Horta (Tetum original), urging him to veto the budget law or ask the Court of Appeals for advice because its unsustainable spending violates several Constitutional provisions. On 7 February, President Jose Ramos-Horta asked the Court of Appeals for an opinion within 10 days. The President's petition (Portuguese text, also Portuguese photocopy (1.4MB)) asks for advice on three questions:

  1. Is creating the Special Funds via the Budget Law, rather than with a separate specific law, permissible under Constitution Article 145.2?
  2. Does creating the Special Funds without specifying detailed expenditures to be paid from these funds violate the transparency requirement specified in Constitution Article 145.2?
  3. Does transferring $321 million more than the Estimated Sustainable Income without a detailed explanation of why this is in the long-term interests of Timor-Leste violate Article 9 of the Petroleum Fund Law, which has superior force?

On the same day, Court of Appeals President Claudio Ximenes asked Parliament for their views (also Portuguese).

Timorese journalists and politicians made many uninformed political pronouncements on this issue, charging that the President was interfering with the functioning of the state. La'o Hamutuk believes that it is essential for the rule of law to apply in Timor-Leste, so we published an article We Must Respect the Constitutional Principles of the President’s Duties (Tetum original) in Timor Post and Diario Nacional on February 11, answering some basic questions:

  • Why did the President ask the Court of Appeals for advice?
  • What is happening in the 2011 State Budget?
  • What is the President asking Court of Appeals?
  • What will happen when the President hasn’t yet promulgated the budget?

On the evening of 11 February, only four days after receiving the President's petition, the Court of Appeals issued a 55-page opinion (also Portuguese). Judges Claudio de Jesus Ximenes, José Luís da Goia and José Manuel Barata Penha solicited and summarized the views of President Jose Ramos-Horta, National Parliament President Fernando LaSama Araujo and Prosecutor-General Ana Pessoa Pinto. After citing extensive scholarly research and previous cases, they concluded:

"For these reasons, the judges of the Court of Appeal have deliberated that the Decree of the National Parliament No 45/II approving the 2011 State budget submitted to the President of the Republic does not violate Articles 145.2 and 115 of the Constitution, nor Article 9 of Law 9/2005 of 3 August (on the Petroleum Fund)."

The President promulgated the budget law the following day, before departing for Israel and Palestine, and it was published together with the court ruling in the official gazette (Portuguese) on 14 February.

Even if the budget is legal and constitutional, it is still bad policy.

On Saturday 19 February 2011, the Council of Ministers met extraordinarily and approved Decree-Law 11/2011 creating the National Development Agency (ADN) (also Portuguese) and Decree-Law 8/2011 regulating the Infrastructure Fund (also Portuguese or official) it will manage. The Council of Ministers approved Decree-Law 12/2011 regulating the Human Capital Development Fund (also Portuguese) on 16 March, and the President of the Republic promulgated all three the same week. On 13 April, the Prime Minister issued Ministerial Diploma No. 9/2011 (Port.) spelling out the internal rules and procedures for the Human Capital Development Fund.

In April 2011, the Prime Minister nominated Samuel Marcal as Director of the National Development Agency (ADN). 

One of the first major procurement processes for the ADN is the MDG-Suco housing, which is allocated $44.6 million from the Infrastructure Fund for 2011. In June, the National Procurement Commission invited an international tender to import 11,855 pre-fabricated houses (bidding document 3.5 MB), with a bidding deadline of 18 July. On 8 September, the NPC announced their intention to award a $100 million contract to import 9,237 houses to Carya Timor Leste and Jonize Construction. The cost per house has increased from $4,000 to $10,800, and local contractors protested that they were excluded from the process.

 La'o Hamutuk will continue to update this page with new developments.

Basic economic facts
(click on each graph to see it larger)
Download this fact sheet as a PDF flyer.

Dependency on imports is unhealthy and unsustainable. Today, agriculture and industry in Timor-Leste cannot provide for our daily needs. This graph is based on official statistics; in reality, imports were probably 50% higher than the $283 million reported for 2009, while exports were less than $10 million. If we cannot produce our own food, water, cement, and other basic necessities, how will we survive when we have no oil money to pay for buying them from overseas?

State spending is growing faster than the domestic economy. If you subtract out 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? 

Our petroleum reserves are small and finite. Even if we succeed in bringing the Sunrise gas pipeline to Timor-Leste, and even if current exploration finds new oil or gas deposits to develop, our total oil revenues are likely to be less than $50 billion. If we spend them all as they came in, averaged over our population and 40 years of production, this averages about $1.65 per citizen per day, or less than twice the 2010 State Budget. If the oil revenues are squandered on ill-considered infrastructure projects, avoidable imports, or handouts to troublesome groups, most of our people will not benefit.

The previous paragraph does not consider the sustainable spending limits in the Petroleum Fund, as they are largely being  ignored. If some money is saved for the future, we could continue to draw on our petroleum wealth for longer than 40 years, but at an even lower level than $1.65/person/day. If the Petroleum Fund Law is revised and money is invested at higher risk, both the level and the duration could be less or more.

The Prime Minister's draft National Strategic Development Plan envisions massive expenditures in physical infrastructure but ignores human resources, especially health and education. If we do not use our own people to develop our nation, we will have nothing left when the expensive projects built by foreign companies deteriorate or become white elephants. And if the plan's intention to borrow billions of dollars is carried out, we will still have to make payments on the debt.

Timor-Leste's economy is weak, but we are fortunate enough to have some oil wealth which could improve our people's lives and develop our economy for the day, less than a generation from now, when our only producing oil and gas field will run dry. If we don't use this opportunity, our children and their children will still live in poverty, wondering what their parents were thinking when they spent the nation's entire nonrenewable resource birthright without creating an economy to replace it.

This graph shows the balance in the Treasury (the Government’s operating bank account) at the end of each quarter, as well as the amount transferred from the Petroleum Fund into the Treasury each quarter. The Treasury balance increases at the end of each fiscal year (June 2007 and December 2008-2010), because the Government saves unused money from the Petroleum Fund to spend in the following year, in violation of the principles of the Petroleum Fund Law.

At the end of 2010, the Treasury account held $340 million, by far the highest level in Timor-Leste’s history. The $2011 budget includes $141 million of this, which is a way for the Government to spend more money without having to increase taxes or revenues. It is a dangerous method, undercutting fiscal responsibility and honest budgeting.

The budget documents illustrate a fundamental flaw in the Government’s financial planning -- a failure to realize that if the state spends more money from the Petroleum Fund in the short term, less will be available for the future.

Budget Book 1 includes chapters on Revenues and Expenditure. In the Revenue chapter, future balances in the Petroleum Fund and the Estimated Sustainable Income are projected assuming that the Government will only withdraw the ESI amount every year. This is shown in the graph above, with the dashed single red line (right-hand axis) indicating the amount withdrawn from the Fund every year, and the solid single red line showing the balance in the Petroleum Fund. (Like every line in this graph, these reflect the Government’s very optimistic assumption that Petroleum Fund investments will earn 4% higher than inflation, much more than they have to date.)

However, the Expenditure chapter explains that the Government plans to withdraw $418-$526 million more than ESI from the Fund every year from 2012 on (dashed double green line), settling down to a 3.5% annual increase in expenditures after the 2012 election. In this case, the balance in the Fund (solid double green line) starts to decline in 2024, and the Fund will be used up by 2035 if no new oil or gas projects come on-line.

For the 2011 budget, the Government assumes that future oil prices well be about 50% higher than they assumed in the 2010 budget, an assumption that La’o Hamutuk believes violates the Petroleum Fund Law’s requirement that it be “prudent.” The higher price assumptions are used in the two scenarios discussed above. If one re-calculates the data based on the prices assumed in the 2010 budget, with the level of expenditures in the 2011 budget, the balance in the Petroleum Fund (triple purple line) will be entirely exhausted by 2030.

On 28 January 2011, Parliament amended the budget to increase the expenditure from the Petroleum Fund during 2011 by $321 million, for a total of $1.055 billion. This will reduce the ESI by $10 million in 2012 and even more in subsequent years.

Juvinal Dias and Charles Scheiner testify to Parliament, 15 Dec. 2010

Parliamentary debate, 12 Jan. 2011

The Prime Minister responds to Parliamentary questions, 14 Jan. 2011

Voting to approve the budget in generality, 14 Jan. 2011

Key documents

During the second half of March 2011, the Ministry of Finance opened a transparency portal to the public, which provides access to past and current budget and expenditure data. They also posted revised "final" versions of some budget documents to their website, including:

The court ruling and the promulgated Budget Law (with annexes, although some lack complete information) were published in the Jornal da Republica in Portuguese on 14 February 2011.  The complete budget law is included in Budget Book 1.

On 14 December 2010, the Ministry of Finance belatedly posted some documents from the 2011 budget to their website, after Parliamentary committees had finished their public hearings:

Other documents have been obtained or scanned by La'o Hamutuk:

Submissions and analysis

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua dos Martires da Patria, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
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