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2.7: Financing
2.7.1: Definition of Financing
Total budgeted expenditure is higher than domestic revenue for 2015. This results in a non- oil deficit domestic revenue minus expenditure which is financed by withdrawals from the
PF, loans and use of the cash balance. Table 2.7.1.1 shows the amount of each financing item. The total amount of financing is equal to the non-oil deficit. The 2015 State Budget is
therefore clearly showing how total expenditure will be financed from either domestic revenue or financing items.
Financing items and domestic revenues have different economic impacts. Domestic revenue is collected from taxes and charges paid by companies and individuals in Timor-Leste. All
else being equal, the higher domestic revenue the less money these companies and individuals have to spend and invest. Consequently Government spending paid for by
domestic revenue does not significantly increase overall demand in the economy; as the increase in demand from spending is approximately equal to the decrease in demand from
companies and individuals who are paying tax. In contrast financing expenditures by withdrawing money from the PF increases the overall
level of demand within the economy. Financing expenditures from loans from international organisations also increases demand in the year that loan financed spending occurs. There
will, however, be a negative impact on demand in the future when the Government begins to repay the loan. An increase in demand, if not matched by an increase in ability of the
economy to produce goods, can cause higher inflation. The Government has analysed the impact of the non-oil deficit on demand, economic
growth and inflation. This analysis shows that the non-oil deficit for 2015 to 2019 is consistent with the strong, high quality economic growth.
Table 2.7.1.1: Financing m
2015 2016
2017 2018
2019 Total Financing
1,399.6 1,864.1
1,797.0 1,572.1
1,352.2
Estimated Sustainable Income ESI 638.5
632.4 616.3
600.0 590.9
Excess Withdrawals from PF 689.0
1,037.3 1,045.3
812.3 711.3
Use of Cash Balance 2.1
0.0 0.0
0.0 0.0
Borrowing Loans 70.0
194.4 135.5
159.9 50.0
Source: National Directorate for Economic Policy
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2.7.2: ESI and Excess Withdrawals
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