A Review of Recent Reforms

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2.1.5: Financing

The financing section of the Budget Book outlines and explains the various components which pay for expenditure in 2014 and outgoing years. The financing of the 2014 State Budget highlights that all the expenditures incurred by the Government will ultimately be paid for through financing from the ESI, excess withdrawals from the Petroleum Fund, loans or the use of cash balance. It is also important to underline that the financing items are equal to the non-oil deficit which is defined as domestic revenue minus total expenditure.

2.2: A Review of Recent Reforms

The Public Financial Management PFM system consists of the institutions, laws and information technology infrastructure through which the Government spends, collects and manages money. A strong and effective PFM system is essential for Timor-Leste to maintain strong economic growth, control corruption and efficiently deliver Government services. In Timor-Leste, an effective PFM system is critical to transforming mineral resources into public wealth. The Government has implemented a broad-based and sustained PFM reform program. This reform program is complex and covers many different aspects of PFM and therefore only selected key aspects of it are described here. Other publicly available documents, such as the Mi ist of Fi a e s “t ategi Pla , des i e the e ti e efo p og a i o e detail. The ke goals a d o po e ts of the Go e e t s efo program described here are: a petroleum tax audit, b providing budget documentation that transparently describes the State Budget, c improving expenditure management, d transparency and e improving analysis and evidence-based policies and expenditures. Among the abovementioned PFM reforms, the recent reforms includes: i a new and unique pa adig fo the A ual Ge e al “tate Budget introduced in 2013. This consists of a consensus between the Government and the Opposition. As the result, a commission that comprised representatives of committees from the National Parliament was established to discuss the proposed budget with the Government and the proposed 2013 General State Budget was unanimously approved by the National Parliament. This unique situation is representative of Timor- Leste s st le a d ultu e of de o a fo de elop e t, as the country is still in the initial stage of development. The paradigm is not contradictory to the atu e of he ks and balances et ee the Go e e t a d the Pa lia e t, because there remains debate at the committee level. ii Mai tai i g the ultu e of o se sus fo t he atio al de elop e t p og a . Fo the fi st ti e the go e e t i ited e e s of National Parliament, including members of the Opposition, to pa ti ipate i the Yello ‘oad Wo kshop to dis uss halle ges a d oppo tu ities, a d defi e atio al priorities and the fiscal envelope fo . The Yello ‘oad Wo kshop as also expanded to development partners and other relevant entities. iii The establishment of an Audit Cou t fo Government projects with contract values exceeding 5.0 million. 9

2.3: Economic Overview