Democratic Republic of Timor-Leste: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of Timor-Leste

International Monetary Fund

No 2025/278, IMF Staff Country Reports from International Monetary Fund

Abstract: The 2025 Article IV Consultation highlights that Timor-Leste’s financial buffers and favorable demographics provide an opportunity to develop its economy. Despite impressive progress since independence, the economy remains under-diversified, while fiscal and external imbalances are large. Growth is estimated to have risen to 4.1 percent in 2024 supported by fiscal expansion and strong credit growth. Growth is projected to remain robust at 3.9 percent this year and to moderate to 3.3 percent in 2026. In order to support growth and macroeconomic stability, Timor-Leste’s substantial savings should be spent better and more prudently. The composition and quality of public spending must be improved by prioritizing investment in physical and human capital. At the same time, containing overall spending is needed to preserve fiscal sustainability. Advancing the financial sector reform agenda, including progress on the issuance of land titles, is crucial to accelerate private sector development. Eliminating large fiscal and external imbalances while facilitating higher growth through structural reforms would support continued macroeconomic stability and deliver higher living standards.

Keywords: executive board assessment; reform agenda; IMF's article; Timor-Leste's independence; consultation cycle; Debt sustainability analysis; Global; Asia and Pacific (search for similar items in EconPapers)
Pages: 77
Date: 2025-09-26
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