Budget passed in general; Committee recommendations

Timor-Leste’s Parliament just completed three days of general debate on the 2013 General State Budget, approving it in generality with 40 votes in favor, zero against, and 25 abstentions (all FRETILIN).

Tomorrow they will begin debate, amendments and voting on each component of the budget, with a final vote on 20 February. During the last few weeks, each Parliamentary Committee held extensive hearings on different sectors of the budget, receiving testimony from La’o Hamutuk and many government officials, and others.  Committee C (Public Finances) compiled its analysis and recommendations with those from other Standing Committees and the Group of Women Parliamentarians into a 92-page report (Portuguese), which La’o Hamutuk has translated into English.

La’o Hamutuk’s web page on the budget includes many documents and reports in English, Tetum and Portuguese, including daily press releases issued by Parliament and opening speeches by Prime Minister Xanana Gusmão and FRETILIN leader Mari Alkatiri.

In its report, Committee C made sixteen of its own recommendations, which we have translated as follows:

1. Mindful of the execution of expenditure supported by money from the Consolidated Fund of Timor-Leste in recent years, Committee C concludes that the Government has enough money available in the Treasury accounts (balances accumulated in CFTL for several years plus interest) to meet part of the appropriations allocated from that Fund for 2013 and, in this way, to reduce the impact of public expenditure on the Petroleum Fund. We therefore recommend that during the detailed discussion of the proposed budget law, priority be given to that financing source to reduce the amount of transfers to be made from the Petroleum Fund in 2013.
2. After approval of the 2012 Rectified Budget, the Government withdrew from the Infrastructure Fund, specifically the “Tasi Mane Project,” $50 million to cover primarily recurrent expenditures from the Consolidated Fund of Timor-Leste, promising in front of the National Parliament to reinstate this amount in the General State Budget for 2013, which has not come to pass. We recommend that when PN discusses the details of this law, it should include this transfer to the Infrastructure Fund, while reducing the “Contingency Fund” and “Appropriations for Whole of Government” (Provision for impact of special regimes, retroactive financing and funds for legal services).
3. The Government allocates $29 million in the next budget for the Contingency Fund, an amount which, despite being consistent with the legislation in force (3% of the overall budget), is high. The use of money from the Contingency Fund during 2011 is questionable, and 2012 execution will probably confirm this. We recommend that the Ministry of Finance require strict adherence to fiscal discipline from all Ministries, in order to avoid systematic and indiscriminate resort to the Contingency Fund. Urgent operating needs that are not covered by initial allocations of various ministries can be overcome by using budget amendments during the year.
4. Taking into account the possible effects of public spending on the prices of goods and services in the domestic market, we recommend specific monitoring the evolution of the consumer price index (CPI), which can be addressed by quickly completing the updated consumer goods basket and quarterly collection of statistical information on this market basket, to analyze the evolution of domestic inflation.
5. By considering the relevant suggestions already made by the Committee C in its last two reports, We return to recommend urgent adoption of the Official Plan of Public Accounting, in compliance with article 10 of Law no. 13/2009 of October 21.
6. Timor-Leste’s economic growth has been almost entirely sustained by oil revenues, and the formal economy barely exists. The current situation is worrisome and requires the Government to increase efforts to gradually create the conditions necessary to increase non-oil revenues.
7. The increased concern with attracting foreign private investment, after the end of the UN mission in Timor-Leste which further accentuated the unemployment rate, leads Committee C to recommend that the Government proceed to implement concrete measures to minimize unemployment in Timor-Leste.
8. The macroeconomic projections for 2013 contained in the Budget Book 1 are superficial and inconsistent with reality, lacking for the future a more thorough and well-founded analysis from the Government. The discrepancy between the data presented in various budget books on the level of unemployment, as well as on national agricultural production, illustrate the situation.
9. Committee C recommends that the government be more realistic with regard to the execution of infrastructure projects included in the Special Infrastructure Fund and proceed to their planning and programming in a structured way, ensuring their quality and continually monitoring their evolution.
10. It is recommended that all ministries be sensitive to gender issues and reflect this sensitivity in allocation of funds in their budgets.
11. Despite the overall appropriation of the Private Budget for National Parliament approved for next year, which is correctly included in the Government’s budget proposal, its distribution among the various categories of expenditure presents inaccuracies, so it is recommended that this be corrected during the detailed discussion of PPL No. 2/III(1), pursuant to the Parliamentary resolution which approved its Private Budget for 2013.
12. Encourages the Government to invest more strongly in renewable energy in 2013, especially in solar energy for electricity production, mainly in Dili and in remote areas of the country, in order to reduce energy and environmental bills, which we understand to be unaffordable in the medium term.
13. It is recommended that the Government quickly introduce a plan for cost recovery for the country’s electrical infrastructure, given the massive investment that has been accumulated in the sector and the fact that Hera Power Station is now partially operational.
14. It is recommended that under general plenary debate of the proposed 2013 budget, the Government should provide criteria and information that underlie justification for allocating $92.5 million for veterans’ pensions and a projected growth of 4% per year for future years.
15. The Committee recommends that in the future, the Government mention in Budget Book 1, not only the amount of borrowing contracted by the state, but also the projected interest rates (fixed and variable) and the actual amount of global interest to pay through the end of the loan periods.
16. Finally, we recommend once again that the Government include in their budget proposals, an evaluation of the of economic, social and environmental impact of their economic, financial and fiscal policies on the population.