Fiscal Policy Challenges in Timor Leste: Is the Resources Curse on the Horizon?

Timor Leste is one of the poorest countries in the world, beset by problems of high rates of growth of population, widespread poverty, and a history of civil disturbances. This paper describes the macroeconomic situation and performance of Timor Leste since its independence in 2002. The focus of this paper is on Timor Leste's use of its oil resources to finance its development. While the opportunity to channel oil revenues for employment generation and economic development are cause for optimism in this country, there is also the danger of a "resource curse" that has plagued several oil-rich countries in the past. Will the current fiscal policy stance of the government lead to sustainable development or would it lead the economy to succumbing to the resource curse? Timor Leste cherishes ambitions of becoming a more prosperous country in the region however, several challenges and constraints remain.