[{"bbox": [97, 153, 1135, 211], "category": "Text", "text": "The budget for 2024 already signals an increase in public investment expenditures. Still, the need for an MTEF prevents verification that this is part of a sustained medium-term trend."}, {"bbox": [97, 220, 1135, 399], "category": "Text", "text": "The reform scenario, elaborated by the IMF, shows that the public deficit can soon be sustainable with a reorientation of fiscal policy, both on the expenditure and revenue sides. In the absence of financing alternatives, the public deficit can only be covered by the Petroleum Fund. In the absence of this source of financing, public expenditures will be drastically reduced, with a brutal impact on the provision of public services. The IMF's reform scenario includes some quantitative targets, which, if achieved, will permit fiscal consolidation and a consequent reduction of fiscal risk while creating the conditions for a more diversified and sustainable development."}, {"bbox": [97, 409, 1135, 559], "category": "Text", "text": "Timor-Leste must embark on a comprehensive reform agenda. This reform includes reducing public expenditure to align it with the economy's absorptive capacity. A well-designed Fiscal Responsibility Law is also crucial to enhance fiscal discipline. Moreover, the quality of public spending should be improved by prioritising investments in human and physical capital, addressing PFM weaknesses, and improving the quality and frequency of macroeconomic statistics, analytical skills, and macroeconomic forecasting and policy analysis."}, {"bbox": [97, 568, 1135, 656], "category": "Text", "text": "It is imperative to gradually mobilise domestic revenue, a critical step towards fiscal sustainability. This includes strengthening the tax administration to improving tax compliance. These efforts should be underpinned by a medium-term fiscal framework, providing a clear roadmap to fiscal sustainability."}, {"bbox": [97, 666, 1135, 754], "category": "Text", "text": "To boost growth and diversify the economy, the government should implement structural reforms to remove bottlenecks in the agriculture and tourism sectors, including land and property, foster digitalisation to boost productivity, and address legal constraints hindering business operations and financial development."}, {"bbox": [97, 763, 1135, 819], "category": "Text", "text": "In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy that meets the eligibility criteria."}, {"bbox": [85, 844, 439, 871], "category": "Section-header", "text": "### 2.3.3 Public Financial Management"}, {"bbox": [97, 892, 1135, 1102], "category": "Text", "text": "The PFM strategy 2022-2027, published in December 2022, continues to be relevant in addressing the main weaknesses of the PFM system identified in the last PEFA published in 2020 and other diagnostic studies. The PFM strategy document identifies and addresses the main weaknesses by formulating consistent reform objectives. However, implementing the PFM strategy faces challenges that the government and donor partners must consider to moderate the expectations regarding attaining short- or medium-term results. Timor-Leste is struggling with a significant shortage of skilled personnel in PFM, so it still depends on extensive foreign technical assistance, which draws a remarkable volume of financial resources from the state budget annually."}, {"bbox": [97, 1112, 1135, 1232], "category": "Text", "text": "The credibility of the PFM strategy has been reinforced with the approval of the reform strategy document and the Ministry of Finance 5-Year Strategic Plan, which will guide the government to deploy the critical pillars of a reliable PFM reform system (institutional set-up, sustainable financial basis, and effective M&E system) over the following years."}, {"bbox": [97, 1241, 1135, 1390], "category": "Text", "text": "The PFM reform actions carried out over the last few years have yet to produce visible policy outcomes regarding fiscal discipline, efficient and effective resource allocation, and better public service delivery. Given the minimal tax base, the state budget financing depends on the Petroleum Fund. Tax collection is still meagre and has decreased in the last few years. Therefore, a significant effort still needs to be made to mobilise domestic fiscal resources while rationalising public expenditure to uphold the long-term sustainability of the petroleum fund."}, {"bbox": [97, 1399, 1135, 1578], "category": "Text", "text": "Tax administration reform has been a priority over the last few years. Since 2020, some actions have been carried out, giving continuity to previous reforms. The main highlights are i) the Upgrading of the Standard Integrated Government Tax Administration System (SIGTAS-V3), ii) the Automated System for Customs Data (ASYCUDA World), and iii) the Taxpayer Registration Programme (TREP), whose consolidation continued during the 2022 financial year; iv) A diagnostic assessment of the Timor-Leste Tax Authority (TLTA) was undertaken in December 2021. The results produced by these information systems are already apparent in improving communication"}, {"bbox": [1023, 1679, 1142, 1705], "category": "Page-footer", "text": "Page 15 of 41"}]