In late January 2012, Timor-Leste’s Ministry of Finance published the “final” Budget Books for the 2012 State Budget, which document the budget as amended and approved by Parliament and promulgated by the President. Although these books show projected spending for 2013-2016 of about $100 million per year more than the Government told Parliament when they submitted the budget last September, they do not show the Petroleum Fund withdrawals that will finance that spending.
The Ministry told La’o Hamutuk that the increased spending comes from Parliament’s amendments to the budget, which removed $200 million for the Timor-Leste Investment Corporation but added $111 million in 2012 expenditures and earlier implementation of projects planned for future years. According to the Ministry’s projection model, Parliament unconsciously increased expenditures in 2013-2016, although these cannot be executed until Government and Parliament enact the budgets for each year.
Compared with the 2012 Budget as presented to Parliament, the “final” budget shows larger future Estimates of Sustainable Income due to Parliament’s reduction of 2012 spending by $89 million, but it does not show reduced ESI from the projected $397 million increase in spending in 2013-2016.
In countries where most revenue comes from converting nonrenewable resource wealth into cash, policymakers often forget that spending costs money. This happens here, as demonstrated by the inconsistency in the “final” 2012 Budget Book 1. Although the additional $397 million in spending will be financed by withdrawals from the Petroleum Fund, the balance in the fund does not reflect this, so the ESI (Estimate Sustainable Income) is unrevised. In other words, the larger withdrawals in tables 2.2 and 4.2 of Book 1 are not reflected in tables 5.8 and 5.10 of the same book, which attempt to show how much money will be in the Petroleum Fund.
The Ministry made a similar mistake when they proposed the 2011 State Budget to Parliament in late 2010, but corrected it in the final 2011 budget after La’o Hamutuk pointed out the error.
After La’o Hamutuk sent a draft of this article to the Ministry on 22 February 2012, they quickly and quietly revised 2012 Budget Book 1 on their website. We appreciate the prompt response, and hope that this is an indication of future collaboration and good will in preventing Timor-Leste from falling further into the resource curse.
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