The final balance of the Timor-Leste Oil Fund fell to US$ 5.8 billion (about 570% of GDP) in 2016, the second year of a net reduction, the International Monetary Fund (IMF) reported in a statement released in Washington.
The statement issued at the end of an IMF team visit led by Ms. Yu Ching Wong says the medium-term outlook for Timor-Leste “is critically dependent on economic diversification as the oil field currently in production will be depleted by around 2022.”
In addition to noting that the Oil Fund is being reduced due to significant withdrawals to finance the public investment programme, the IMF team mentioned that it is necessary to know whether these large projects will generate sufficient economic return, leading to an increase in tax revenues and, therefore, improving fiscal sustainability.
The team noted that internal revenue collection is key and welcomed the creation of the Customs Authority and the Tax Authority, as well as the action plan to increase compliance with tax obligations.
“Equally critical will be the approval of the Value Added Tax (VAT) legislation and the introduction of this tax by 2020, in order to stimulate the mobilisation of more internal revenues,” the statement said. (macauhub)