LH Considers that the Proposed 2023 State Budget Ignores the State’s Actual Financial Situation

 Liga ba artigu ida ne'e iha Tetum 

On 18 October 2022, the NGO La’o Hamutuk sent a submission to the Deputies in National Parliament about the proposed General State Budget for 2023. With this submission, La’o Hamutuk wants to contribute to the debate on the 2023 budget so that it will be more sustainable and responsive to people’s needs.

The annual Parliamentary debate about the budget is an opportunity for Members of Parliament, Government and the public to evaluate, discuss and design plans which are strategic and necessary to address the problems which have confronted our nation for years.

Our submission includes the following main points:

Sustainability

The real situation of state finances is already precarious, as La’o Hamutuk has advised for many years. The Ministry of Finance Report on the proposed 2023 budget presents one scenario to extend the life of the Petroleum Fund until 2045. This would give more time for the government to diversify the economy to delay the crisis which will come when we encounter a fiscal cliff because the Petroleum Fund is used up, which the Ministry of Finance projects will happen in 2034. According to the most sustainable model which maintains the Petroleum Fund until 2045, spending needs to be reduced by 3% every year through 2034. But tables in the budget books show spending, including withdrawals from the Petroleum Fund, increasing every year through 2027 (with no information after that). 

Therefore we think that even though Government knows that we are in danger of falling over a fiscal cliff, it continues not to see it as important, and fails to respond to this reality. There’s no value in discussing a sustainable model if it is not implemented.

We also observe that Government projections are inconsistent and suggest that they provide Parliament and the public with more accurate projections of total spending and the cost of each program for the next four years.

Petroleum Dependency

Timor-Leste now depends mainly on the investment of the Petroleum Fund in international financial markets, where it has lost more than $2 billion already this year. Unfortunately, the budget books fail to describe this risk accurately, and their scenarios about the Petroleum Fund continue to assume future returns of 4.1%/year, while failing to consider the possibility of lower or negative returns. 

Although the Petroleum Fund has financed state programs and activities for many years, unfortunately Timor-Leste's leaders did not use that opportunity to build an economy which is productive, sustainable and diversified. Government continues to dream that revenues from the oil and gas industry will support the economy for the long term, while ignoring the development of sustainable and productive sectors. Therefore, La’o Hamutuk asks the Deputies to recognize that petroleum will not resolve the problems which we confront, and is failing to bring benefits to our people.

Transparency and Accountability

Transparency and accountability should continue to be  priorities for this country. Unfortunately, we see weaknesses in implementing transparency in this budget process.

For example, Parliament’s website does not function, and ‘public’ hearings are not open to the public. We also suggest maintaining past good practices, such as producing budget books in Tetum and English, not only in Portuguese.

As civil society, we were very disappointed not to get the opportunity to testify in a hearing of Parliament Committee C. The budget process is stronger with the participation of civil society, and we encourage Parliament to improve space for us and the public to provide analysis which can further enrich ideas before the debate with the Government.

We also suggest that the Ministry of Finance should clarify the budget of the National Liberation Combatants Fund (FCLN), because the repetition of the appropriation to FCLN in both the 2022 and 2023 budgets causes confusion.

Priority and Strategy

La’o Hamutuk doubts that the Government can carry out the budget's 275 measures with quality, considering past execution levels and that many Government members and staff will be engaged in political campaigns next year. It would be better to prioritize programs which are realistic, according to abilities and human resources, and which can really be delivered with execution and quality.

The sectors directly linked to strengthening human resources – education, health, clean water and agriculture – receive only 16% of the allocations in the entire 2023 budget. Therefore, we encourage the Deputies to discuss this in-depth with the Government during the budget debate.

To create an efficient budget, Parliament should tighten evaluation processes for new programs to ensure that they really benefit the people, and should reassess budget allocations which have not yet proven their benefits.

La’o Hamutuk’s submission made seven specific recommendations to Parliament and Government to improve the 2023 budget and the budgeting process.

Click here for information on the 2023 State Budget, including documents, presentations schedules, analyses and graphics.