2013 State Budget moves toward sanity

This week, Timor-Leste’s Government will send its proposed General State Budget for 2013 to Parliament for approval. La’o Hamutuk appreciates that Timor-Leste will no longer have the second-fastest-growing state budget in the world. The appropriations in the new budget are more consistent with Timor-Leste’s limited oil and gas reserves. As we await the Budget Books which will contains the details, we examine the overall picture.

The Government issued a press release yesterday, summarizing the Council of Ministers meeting which approved the proposed 2013 Budget, which appropriates $1,798 million, as follows:

• $160.3 million for Salaries and Wages
• $461.7 million for Goods and Services
  (including $42.4 million through the Human Capital Development Fund, $8.5 million of which is carried over from 2012)
• $236.5 million for Public Transfers
• $  47.2 million for Minor Capital
• $891.9 million for Development Capital
  (including $752.9 million through the Infrastructure Fund, $444.4 million of which is carried over from 2012).

New appropriations and loans add up to $1.34 million, a significant and welcome moderation of rapid budget escalation.

The above graph shows that the total size of the 2013 budget will be $1.8 billion, about the same as the final rectified 2012 budget. Executed expenditures during 2012 will probably be less than $1.4 billion, so 2013 is still a significant increase in spending.

The biggest change is on the revenue side. Instead of withdrawing $1.5 billion from the Petroleum Fund as was done in 2012, the 2013 budget will withdraw only $1.2 billion. This is 4.6% of Timor-Leste's anticipated petroleum wealth, and is still more than the 3% Estimated Sustainable Income, although it is less unsustainable than the 6.7% the Government withdrew from the Petroleum Fund during 2012. La'o Hamutuk appreciates this move in the direction of fiscal responsibility, and we hope it will continue.

The remainder of the non-oil "budget gap" will be filled with $453 million carried over from unspent money in the Infrastructure and Human Capital Development Funds at the end of 2012. The Infrastructure Fund began operation in 2011 and had $132 million left at the end of that year, which was carried over to  2012. During 2012, the Government appropriated $707 million more for the Fund to finance ambitious, multi-year, mega-projects. However, only about 14% of the non-electricity Infrastructure Fund allocations for 2012 had been spent by mid-December, with another 25% committed.

On the expenditure side of the 2013 State Budget, salaries and purchases of goods and services will go up significantly compared with 2012. Public transfers (pensions, veterans' benefits, etc.) were recently increased in the October budget rectification and will continue at this higher level. Capital expenditure will get smaller, perhaps in recognition that some of the most unrealistic proposed projects will not benefit Timor-Leste or are impossible to implement on ambitious schedules.

Note: This blog entry, including the first graph, was revised on 19 December to reflect information in the budget books, which we posted on La'o Hamutuk's web page on the 2013 budget on 2 January. We will continue to provide updates, analysis and documents on that page.  
The first graph shows the Government's figure for Timor-Leste's non-oil GDP as a green line with squares.  From 2009 on, the Government and IMF have revised the method by which this is calculated, and it is not comparable with values before 2009.