14 November 2014

Timor-Leste's Petroleum Fund Balance questioned by Lao Hamutuk

ETLJB 12/11/2014 According to a report by Macauhub on 11/11/2014 (http://www.macauhub.com.mo/en/2014/11/11/timor-leste-oil-fund-worth-us16-6-billion-in-september/) referencing a statement from the East Timor Central Bankissued on 10/11/2014, the value of the East Timor Oil Fund increased by just US$177 million in the third quarter due to payments to the state budget.

The Macauhub report states that "[a]ccording to the statement issued in Dili, the value of the Oil Fund was US$16.6 billion at the end of September....[and that] [f]rom July to September the Fund recorded US$522.35 million of gross inflows in contributions and royalties, and outputs amounted to US$345.35 million, including US$340 million in the form of transfers to the state budget.

The Timor-Leste Oil Fund, which was created in August 2005, receives all the state’s revenues from oil exploration.

Revenues for the fund are then invested in financial assets abroad and the only cash outflows are for the state budget, which must be approved by the national parliament.

However, the East Timorese civil society organisation that, among other things, monitors the oil and petroleum funds, the Macauhub article contains a fundamental error. According to Lao Hamutuk, the value of the Petroleum Fund actuall decreased during the third quarter of 2014, from USD $16.634 billion at the beginning of the quarter to $16.584 billion at the end of September.

According to Lao Hamutuk, the $50 million drop was because the Fund incurred net losses in foreign exchange of $276 million during the quarter, leading to an overall loss in investments of $232 million. When added to the $340 million withdrawn from the Fund to finance state activities, the losses exceeded the income from oil and gas.

More information on the Fund's performance, including the latest quarterly report from the Central Bank of Timor-Leste is made available by Lao Hamutuk at http://www.laohamutuk.org/Oil/PetFund/05PFIndex.htm.

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