Timor-Leste—Strengthening Public Finance Management

Since restoring its independence in 2002, Timor-Leste has made significant progress in key development areas, including infrastructure, institutional frameworks, and human capital development. However, public services do not reach all citizens adequately, with groups such as women, children, people living in poverty, and persons living with disabilities at particular risk of being underserved.

Deficient public services, particularly in rural areas, affect people’s access to food, clean water, and health services, such that nearly 40 percent of Timorese still live below the national poverty line, stunting due to malnutrition still affects nearly half of all children below age five—the highest rate in Southeast Asia—and anemia affects more than one-fifth of women of reproductive age.

Effective, accountable use of public resources remains the essential foundation for addressing public service shortfalls. Currently, however, Timor-Leste lacks sufficient capacities and systems to mobilize and manage public resources effectively and efficiently. Notably, the main source of funding for public expenditure is the country’s Petroleum Fund, which will be exhausted within a decade at the current rate of expenditure.

Against this backdrop, the Strengthening Public Finance Management in Timor-Leste project is designed to enhance the public financial management (PFM) system at all levels of government. Collaborating closely with the Ministry of Finance and other government stakeholders, the project will work across four components—PFM reform, revenue mobilization, budget planning, and fiscal decentralization—to support the country in realizing the five goals laid out in its 2022-2027 PFM Reform Strategy:

• Strengthen fiscal policy to improve fiscal discipline and macroeconomic stability.
• Enhance resource mobilization to create fiscal space.
• Allocate resources consistent with the priorities in the Strategic Development Plan 2011-2030.
• Promote the efficient use of public resources and delivery of services through better budget execution.
• Promote accountability through external scrutiny and transparency of the budget.

Strengthening the PFM system in Timor-Leste will promote socio-economic development and foster a more resilient economy better able to weather intensifying climate and disaster risks. The project will also support the Government of Timor-Leste to put in place robust governance and monitoring and evaluation mechanisms to underpin its PFM reforms. In so doing, it will contribute to the establishment of an increasingly professional public sector capable of meeting the needs of all citizens. By improving the quality, efficiency, and accessibility of public services, it is anticipated that this initiative will visibly demonstrate good governance and the rule of law, thereby building citizen trust in the democratic system.