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The 2023 Article IV Consultation discusses that Timor-Leste has made impressive progress since independence in 2002 but remains a fragile post-conflict nation with pressing development needs. With oil and gas production having recently come to a halt, progress on diversifying the economy and developing the private sector is urgently needed. The discussions focused on ensuring that Timor-Leste’s substantial savings are best utilized to support development objectives while achieving fiscal sustainability. In order to develop a vibrant private sector, Timor-Leste should undertake an ambitious agenda of reforms. Public expenditure should be reduced to align it with the economy’s absorptive capacity, and its quality improved including by further prioritizing spending on human and physical capital. Domestic revenue should be gradually mobilized. A medium-term fiscal framework should underpin these efforts by setting a clear roadmap to fiscal sustainability. To boost growth and diversify the economy, structural reforms should remove bottlenecks in the agriculture and tourism sectors and foster digitalization to boost productivity, while addressing legal constraints that hinder business operations and financial development.

Commodities --- Computer Programs: Other --- Data Collection and Data Estimation Methodology --- Debt Management --- Debt sustainability analysis --- Debt --- Debts, External --- Debts, Public --- Econometrics & economic statistics --- Expenditure --- Expenditures, Public --- Exports and Imports --- External debt --- Fiscal Policy --- Fiscal policy --- International agencies --- International Agreements and Observance --- International Economics --- International economics --- International institutions --- International Lending and Debt Problems --- International organization --- International Organizations --- Investment & securities --- Investments: Energy --- Labor --- Macroeconomics --- Monetary economics --- Monetary Policy --- Monetary policy --- Money and Monetary Policy --- National Government Expenditures and Related Policies: General --- Oil --- Petroleum industry and trade --- Public debt --- Public finance & taxation --- Public Finance --- Sovereign Debt --- Statistics --- Timor-Leste, Democratic Republic of