05 November 2013

Hearings begin on 2014 budget proposal

Although the Government was ten days late in submitting its proposed 2014 State Budget to Parliament, Parliament still hopes to approve it before Christmas and has begun "public" hearings. Download the hearing schedule here.

In a positive development, the Ministry of Finance posted electronic versions of the six budget books to their website on 25 October, the same day they sent the budget to Parliament. The Ministry also released their presentation (Tetum) to a Parliamentary seminar the previous day. These and other materials, with deeper analyses in English and Tetum, are on La'o Hamutuk's frequently updated web page on the 2014 budget.

We appreciate that the overall fiscal envelope has been reduced from $1.65 billion in the 2013 budget to $1.5b in the proposed one, largely by cutting funding for infrastructure mega-projects which were unlikely to be implemented on schedule. However, recurrent appropriations continue to go up, and executed spending during 2013 will probably be less than $1.2b, so the 2014 proposal still represents a 25% increase. Unlike in 2013, the 2014 budget again spends more than the Estimated Sustainable Income from the Petroleum Fund, $903 million (ESI is $632 million). Expected future oil revenues have dropped markedly due to lower production and price forecasts; the Bayu-Undan and Kitan fields will by exhausted by 2020.

La'o Hamutuk is glad to see increased appropriations for health and education, although they remain below international norms.  However, agriculture, the livelihood of most Timorese people, is still under-served. Although the South Coast Highway has been cut, other parts of the questionable Tasi Mane project remain in the budget.

Unfortunately, Parliament will hear from many fewer non-state witnesses than in past years. Although Parliament has invited La'o Hamutuk to present or observe at hearings and seminars for all seven budget processes conducted since 2009, they did not do so this time. Nevertheless, we will continue to analyze the impact of this budget on Timor-Leste's future, and have written to Members of Parliament (Tetum original) explaining some issues we would have discussed if they had invited us to testify.

We encourage others to study the budget proposal and to share their thoughts with Parliament. We hope that the upcoming debate will be fact-based, lively, transparent and productive.

[This post was updated on 11 November 2013.]


    If you think the Bayu Undan revenue will run out in 2020, you should look at the relative revenue of gas versus liquids. Liquids are the lions share of the revenue, but liquids are expected to run out much sooner than the gas.

    1. You are right, although liquids production has already dropped significantly, and during the first 10 months of 2013, 49% of the royalties paid by Bayu-Undan were from gas. Compare this with 41% during 2012 and 36% during 2011. Although revenues to Timor-Leste also include taxes, the royalties (FTP) give a good indication of the relative contribution of each product. Here are the average monthly royalty payments to Timor-Leste during the last three years from Bayu-Undan (Australia also gets 1/9 as much):
      2013 $7.9m gas, $8.1m liquids
      2012 $6.7m gas, $9.7m liquids
      2011 $6.2m gas, $11.1m liquids.
      Gas production is fairly constant, except for a six-week maintenance shutdown in mid-2012, while liquids have been declining.
      These numbers come from ANP: http://www.anp-tl.org/webs/anptlweb.nsf/pgLafaekFTPListl
      For the Government's analysis of the latest Bayu-Undan forecast, see pages 42-45 of http://www.laohamutuk.org/econ/OGE14/Prop/OGE14Bk1Oct2013en.pdf.
      -- Charlie, La'o Hamutuk