La’o Hamutuk explained that 95% of state revenues, including those which pay for veterans’ pensions, come from unsustainable petroleum reserves. Timor-Leste’s limited oil and gas resources are not enough to finance state activities over the long term. When the state spends a lot on one sector, other sectors lose money.
According to an internal Finance Ministry document that La’o Hamutuk received, the Government expects to continue to pay veterans and their descendants until 2122. This document describes a reference case, which will spend $2.8 billion of Timor-Leste’s resources on veterans’ pensions. If the number of veterans increases and the minimum wage goes up, the Government could expend more than $7 billion for veterans. The Finance Ministry estimates that Timor-Leste’s total petroleum wealth is around $26 billion.
Today Timor-Leste confronts high inflation, around 11% during 2012. We have almost no domestic economy which can absorb state spending which circulates in the country.
Even more worrisome, during 2010-2012 state expenditures increased 31% per year, and our domestic revenues and return on Petroleum Fund investments remain small. If we continue in this direction, the Petroleum Fund will be empty by 2020. Without oil money, what will Timor-Leste use to pay veterans’ benefits? It would be better to invest in educating our children than to spend on former combatants.
La’o Hamutuk suggests that the policy for transferring public funds to veterans should be based on our nation’s economic reality, so that it will benefit our domestic economy rather than stimulating inflation and increasing the burden on poor people who are not among these beneficiaries.