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.

LH konvite media lokal atu mai briefing OJE

Konvite ba briefing/diskusaun kona-ba OJE 2013 ba jornalista sira

Atu apoiu jornalista atu analiza no hatene liu tan informasaun kona-ba proposta Orsamentu Jerál Estadu 2013, La’o Hamutuk hakarak konvida ita-boot sira husi Media ne’ebé interese atu komprende orsamentu iha Timor-Leste atu bele mai tuir briefing no diskusaun kona-ba OJE 2013 ne’ebé sei realiza iha

Data    : Sesta Feira, 1 Fevreiru 2013
Horas :  14.00 too 16.45
Fatin   : La’o Hamutuk, Rua dos Martires da Patria, Bebora, Dili

Ita boot bele hetan dokumentu sira no ami nia komentáriu kona-ba OJE 2013  no aprezentasaun ba briefing husi ami nia website.
Bele konfirma ita-boot sira nia partisipasaun ba +670 7734-8703 ka juvinal@laohamutuk.org

TL budget process still lacks openness

Timor-Leste's Parliament is discussing the State Budget for 2013, and their plenary debate will be broadcast live next week.  La'o Hamutuk web-published the main budget documents, and local media report politicians' comments every day.  We have also posted our testimony (also Tetum) and briefing (also Tetum).

But how much do people know, how open is the process, and how can citizens be involved more effectively?

The International Budget Partnership conducts an Open Budget Survey every two years, calculating an Open Budget Index for about 100 countries. The 2012 survey was released a few days ago, and Timor-Leste scored 36 out of a possible 100. This is slightly better than our score of 34 two years ago, but is still "minimal," far below average. (Global Open Budget report)

Although Timor-Leste has been a global leader in transparency on petroleum revenues, our budget process should be much better. We scored poorly because little information is available before the Council of Ministers approves the proposed budget, because a "Citizens Budget" in understandable language is not published while the budget is being debated, and because mid-year reviews, year-end reports, and audit reports are not published or are published too late.

We agree with the recommendations by the International Budget Partnership (see their report on Timor-Leste, also in Portuguese). These include publishing the documents listed above, providing more comprehensive and better-classified data on past expenditures and future forecasts, showing how the budget interacts with policy proposals, publishing program-level budget details and conducting a public pre-budget policy debate. We are also disappointed that the Government did not respond to the draft Open Budget Survey questionnaire, so that their views would be included. The complete Timor-Leste questionnaire, with answers and peer reviewer comments, is published here.

In addition to the recommendations in the Open Budget Survey, La'o Hamutuk suggests that the General State Budget should include revenues and expenditures by all state entities, including the TimorGAP national oil company, the National Petroleum Authority, the Central Bank and others. We also encourage Government to make an effort to estimate future outlays, rather than applying a blanket 4% annual increase to every line in the Consolidated Fund budget. Most of the largest expenditures -- salaries, generator fuel, veterans' pensions, infrastructure packages, minor capital purchases -- could be projected more accurately. Together with total anticipated cost information for major projects, this would enable Ministers, Parliamentarians and the public to evaluate the future implications of large programs, which is essential as we export our limited non-renewable gas and oil wealth.

Konvite ba briefing/diskusaun kona-ba OJE 2013

Atu aumenta kapasidade analiza no hatene liu tan informasaun kona-ba proposta Orsamentu Jerál Estadu 2013, La’o Hamutuk hakarak konvida sosiedade sivíl ne’ebé interese ba analiza orsamentál nian atu bele mai tuir briefing no diskusaun kona-ba OJE 2013  ne’e sei realiza iha:

Loron Sesta Feira, 25 Janeiru 2013
Tuku 10.00 too 12.30 ka tan
Iha: La’o Hamutuk, Rua dos Martires da Patria, Bebora, Dili

Ita boot bele hetan dokumentu sira no ami nia komentariu kona-ba OJE 2013 iha http://www.laohamutuk.org/econ/OGE13/12OGE13.htm.

Download aprezentasaun husi briefing ida ne'e hanesan PowerPoint ka PDF.
Download English translation of the briefing as a PowerPoint or PDF.

LH advice on 2013 state budget

This week, La'o Hamutuk testified before two Committees of the Timor-Leste National Parliament about the proposed General State Budget for 2013.  We praised some good aspects, and identified other elements which need improvement.

You can download our written submission in English or Tetum.  It covers the following topics:

• We appreciate the slower rate of escalation in the total budget.
• Declining oil revenues should inform budget planning.
• Double-digit economic growth, amidst inflation, does not benefit most people.
• Parliament needs total cost information for the Tasi Mane oil infrastructure project and other multi-year projects.
• Non-renewable electricity gets more and more costly.
• The Contingency Fund should be smaller.
• Important information is missing or confusing in the budget documents.
• Veterans’ pensions: how much in future decades?
• Parliament should analyze the risks of public borrowing.
• The MDG-Suco housing program perpetuates past mistakes.
• Government continues to neglect human resources.
• Other legislation also requires attention.

We also wrote a short paper on energy policy, in Tetum.  More information, documents and analysis are on our frequently updated budget web page.

2013 Budget Documents available

As we begin a new year, La'o Hamutuk is making the 2013 budget books prepared by the Ministry of Finance available on our website with  summary information and preliminary analysis.

Update 21 January: La'o Hamutuk testified before two committees of the RDTL National Parliament last week. Download our submission in Tetum or English.

The total budget will be $1.8 billion, about the same as in 2012. About one-fourth of it will be financed with unspent money in the Infrastructure and Human Capital Development Funds, reducing the anticipated withdrawal from the Petroleum Fund in 2013 to $1.2 billion. This is 4.6% of Timor-Leste's anticipated petroleum wealth less unsustainable than the $1.5 billion the Government withdrew from the Petroleum Fund during 2012.

Although capital expenditure will be less than in 2012, recurrent expenditure will increase by 20%.  For more information and analysis, see La'o Hamutuk's web page on the 2013 budget.  We have also  published the final Budget Book for the October 2012 mid-year rectification.

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.