14 August, 2019
One of Australia’s closest neighbours, Timor Leste, is a young country. In fact, it is currently the fourth-youngest country in the world. After centuries of occupation, Timor Leste was officially declared independent in 2002. Since then, the nation of Timor Leste has been working hard to establish itself and repair the physical and psychological damage from years of occupation and civil war. But despite its efforts and resilience, the country still faces challenges as it tries to establish itself in the face of diminishing resources.
To ensure Timor Leste’s future, their government created the Petroleum Fund, an autonomous department designed to receive and invest the money gained from oil products. Its function is to allow Timor Leste to become sustainable and to allow for the future of the country.
Any initial revenue from petroleum does not directly pass through the government. Instead, it goes straight into the Petroleum Fund. Every year the country outlines its yearly budget and makes withdrawals from the Petroleum Fund to help fund the budget. After being guided by the Estimated Sustainable Income (ESI), withdrawal amounts were set at 3% of petroleum wealth, although excess withdrawals have been allowed when required. The Petroleum Fund was reported to have 17.1 billion in September 2018. An example of how the Fund works is outlined below:
In the 2019 budget, Timor Leste is to withdraw $1,196.4 million and $667.4 in excess withdrawals from the Petroleum Fund to supply the 2019 budget plan of approximately 1.8 billion (including loans). The initial $1,196.4 million is how much they can withdraw this year, whereas excess withdrawals need to meet a specific need with the express purpose to invest in the longevity of Timor Leste.
The 2019 budget plan has $366.4m allocated to the Infrastructure Fund, which handles on-going infrastructure projects for the state. These projects include creating roads, clean water, agriculture and accessible electricity.
Despite these attempts to provide many of the basic needs and amenities for their citizens, Timor Leste still has a long way to go to ensure all of their people are living healthy lives with reliable incomes. And, until the country can become self-sufficient in this way, additional help from external sources such as ADRA to fund and create projects for citizens, is welcomed.
Concerns over a lack of resources for Timor Leste in the future may be well warranted, although Timor Leste is moving in a positive direction as the budget claims they see a 5% increase in non-oil products domestically. With the steady financial plan, they expect this to increase over the next few years.
Words: Jefferson Shaw